Personal Finance

Liquidated StockOptions to RRSP account

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  • Nov 25th, 2009 5:43 pm
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Member
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Sep 9, 2006
217 posts
14 upvotes

Liquidated StockOptions to RRSP account

Hello guys,

I have recently changed jobs and at my last work place I took part in the employee sponsored Stock Option plan. Now that I am no longer with them I need to make a decision on what needs to be done with the Stocks.

I am planning to liquidate them and transfer the cash to my RRSP account and the company has an option to do that as long as i provide them my RRSP account information.

I am just wondering if let the company do the transfer, will it still count as Capital Gain and will be subject to income tax?

Is there any way i can avoid taxes incurred by such a transaction?

many thanks,


jD.
justDeals is not a member of any public groups and a very unsatisfied Questrade customer.
6 replies
Deal Addict
Feb 9, 2005
4172 posts
20 upvotes
There is no way to avoid the gains being considered capital gains and being taxed.
Deal Addict
Dec 28, 2006
2497 posts
138 upvotes
Saskatoon
AllWheelDrift wrote: There is no way to avoid the gains being considered capital gains and being taxed.
There will not necessarily be a capital gain. The difference between the price paid by the employee and the FMV at the time they are acquired is a taxable benefit and treated as income. Once the shares are acquired the ACB is the same as the FMV at that time. If they are sold after that the difference between the ACB and proceeds of disposition may be a cap gain (or loss).

If the shares are acquired and sold right away there may be no gain or loss if the sale price is the same as the FMV at the time of acquisition, just the taxable benefit.
Member
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Sep 9, 2006
217 posts
14 upvotes
I see what you are saying, however not sure about the acquired and sold part? I thought I always own the stocks, is it different from 'acquiring' now?

What is ACB and FMV btw?

thanks,
ghostryder wrote: There will not necessarily be a capital gain. The difference between the price paid by the employee and the FMV at the time they are acquired is a taxable benefit and treated as income. Once the shares are acquired the ACB is the same as the FMV at that time. If they are sold after that the difference between the ACB and proceeds of disposition may be a cap gain (or loss).

If the shares are acquired and sold right away there may be no gain or loss if the sale price is the same as the FMV at the time of acquisition, just the taxable benefit.
justDeals is not a member of any public groups and a very unsatisfied Questrade customer.
Deal Addict
Feb 9, 2005
4172 posts
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justDeals wrote: I see what you are saying, however not sure about the acquired and sold part? I thought I always own the stocks, is it different from 'acquiring' now?

What is ACB and FMV btw?
Well, you mentioned Stock Options, but I suspect what you're actually describing may be an Employee Stock Purchase Plan.

Options grant you the right to buy stock at a certain price, and until you exercise the options, you don't actually own the stock.

FMV = Fair Market Value, i.e. the price the shares were trading at.
ACB = Adjusted Cost Base (what you "paid" for the stocks which in the case of stock options or employee share purchase plan may not really be what you paid but rather the FMV when you acquired the shares.

Another strategy is to donate some stocks to charity. In that way you get to value the stocks based on their current value for the purposes of the charitable deduction but don't trigger capital gains on the shares you donated. The donation tax credit will offset capital gains tax on the stocks you do sell.
Member
Sep 28, 2009
338 posts
1 upvote
London
Really? if the stocks go from one RRSP to another he still has to pay cap gains tax?
Deal Addict
Feb 9, 2005
4172 posts
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LondonTown wrote: Really? if the stocks go from one RRSP to another he still has to pay cap gains tax?
No, if they go from one RRSP to another there is no cap gain tax. The way I understood the question was they aren't in an RRSP at this time and he's wondering if he can move them to an RRSP without triggering cap gain tax.

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