Personal Finance

Calculate tax from Employee Stock Purchase plan

  • Last Updated:
  • Mar 13th, 2019 12:15 pm
[OP]
Newbie
Sep 2, 2017
26 posts
17 upvotes

Calculate tax from Employee Stock Purchase plan

My workplace has an Employee Stock Purchase Plan (ESPP) where we get a 15% discount off the stock price. The company stock is listed on NYSE. My salary in $CAD is converted to $USD first, then stock purchased at 15% discount. I sell all of it within a month, and then convert from $USD back to $CAD.

I'm confused as to how I would calculate capital gains. My understanding:
  1. The 15% discount is already reported as "income" on my pay-stub twice a year on each of the purchase dates.
  2. Any other gains excluding the discount is actual capital gains or losses.

How do I factor in the difference in exchange rate of purchase date CAD to USD versus when I convert back from USD to CAD?
How would I calculate the capital gains excluding what is already declared in pay stub?


Using rough numbers:
I contributed $6000 towards ESPP. After converting my sold shares back to $CAD, I deposited $7100 at the bank. So I made $1100. On my pay stub, there's additional benefits income from ESPP reported as $1500.
So that means the government currently thinks I have made $1500 plus any unreported capital gains. But really I made $1100. How do I report the difference? Should I report $400 in capital loss?
Last edited by splatapus on Feb 23rd, 2019 12:39 pm, edited 2 times in total.
17 replies
Deal Addict
Apr 27, 2015
1674 posts
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Don't you get T4PS? My wife also has ESPP with 50% discount and I just fill out T4PS form.
T4PS slips show allocation and payment of dividend and capital gain income from Employee Profit Sharing Plans.
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[OP]
Newbie
Sep 2, 2017
26 posts
17 upvotes
gibor365365 wrote: Don't you get T4PS? My wife also has ESPP with 50% discount and I just fill out T4PS form.
No T4PS for me. My employer reports discount onto T4 as taxable benefits, box 38.

Anyways I got my answer by calling in to CRA. On T4 employer reported ~$1500 $CAD of benefit income from ESPP. However when I do my proceeds in $CAD minus my ACB in $CAD, the amount was $1100. Which is the actual amount I made off this program.
So the $400 difference I can declare as capital loss. As I was really taxed "extra", I never received $1500, only $1100.
I explained to the CRA rep that this was due to exchange rate difference on date of purchase vs. date when I sold, unlucky for me. Question solved.
Deal Fanatic
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Jan 6, 2002
5530 posts
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Toronto
splatapus wrote: I explained to the CRA rep that this was due to exchange rate difference on date of purchase vs. date when I sold, unlucky for me. Question solved.
Currency conversions losses (and gains) are taxation/investment factors as well,. Not just "unlucky you" -- it should be tracked as such and claimed.
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Deal Addict
Jul 3, 2017
3860 posts
2773 upvotes
Any money your employer contributes towards share purchase, or any direct discount they give from market value, is a taxable benefit and goes directly onto your income.

Subsequently you own the stock and report capital gains/losses from date of purchase just as you would on any stock.

If you need to convert US$ <-> Cdn$, you use the Bank of Canada rate, or produce receipts for actual converted value.
Deal Addict
Feb 21, 2004
1400 posts
184 upvotes
Montreal
Pretty much what Exp315 above here said.

You're luck to be able to sell it right away though. The US Company I work for forces a withholding period of 18 months before being allowed to sell them despite me being a Canadian. annoying
Member
Aug 20, 2015
472 posts
254 upvotes
Toronto
splatapus wrote: No T4PS for me. My employer reports discount onto T4 as taxable benefits, box 38.

Anyways I got my answer by calling in to CRA. On T4 employer reported ~$1500 $CAD of benefit income from ESPP. However when I do my proceeds in $CAD minus my ACB in $CAD, the amount was $1100. Which is the actual amount I made off this program.
So the $400 difference I can declare as capital loss. As I was really taxed "extra", I never received $1500, only $1100.
I explained to the CRA rep that this was due to exchange rate difference on date of purchase vs. date when I sold, unlucky for me. Question solved.
I do it this way as well, I claim $7500 in ACB and $7100 in proceeds for a $400 capital loss. I'm glad to hear the CRA confirmed it's correct.
Newbie
Dec 10, 2007
25 posts
6 upvotes
Montreal
splatapus wrote: No T4PS for me. My employer reports discount onto T4 as taxable benefits, box 38.

Anyways I got my answer by calling in to CRA. On T4 employer reported ~$1500 $CAD of benefit income from ESPP. However when I do my proceeds in $CAD minus my ACB in $CAD, the amount was $1100. Which is the actual amount I made off this program.
So the $400 difference I can declare as capital loss. As I was really taxed "extra", I never received $1500, only $1100.
I explained to the CRA rep that this was due to exchange rate difference on date of purchase vs. date when I sold, unlucky for me. Question solved.
In a similar situation - how did you wind up entering the info on your return? Schedule 3? Did you have to make an adjustment to your T4? Thanks!
[OP]
Newbie
Sep 2, 2017
26 posts
17 upvotes
cocobeeg wrote: In a similar situation - how did you wind up entering the info on your return? Schedule 3? Did you have to make an adjustment to your T4? Thanks!
I entered as Capital Loss on Schedule 3.

No adjustment to T4. Once the company has bought the stock for you, the difference between what you put in versus what the stock is worth on that day is your income that gets reported on T4. Whatever happens after this point (foreign exchange losses, stock goes up/down) is all capital gains/loss, so has nothing to do with T4 anymore.

That's my understanding.
Jr. Member
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Jan 23, 2019
107 posts
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Black site, Canada
splatapus wrote: I contributed $6000 towards ESPP. After converting my sold shares back to $CAD, I deposited $7100 at the bank. So I made $1100. On my pay stub, there's additional benefits income from ESPP reported as $1500.
So that means the government currently thinks I have made $1500 plus any unreported capital gains. But really I made $1100. How do I report the difference? Should I report $400 in capital loss?
splatapus wrote: No T4PS for me. My employer reports discount onto T4 as taxable benefits, box 38.

Anyways I got my answer by calling in to CRA. On T4 employer reported ~$1500 $CAD of benefit income from ESPP. However when I do my proceeds in $CAD minus my ACB in $CAD, the amount was $1100. Which is the actual amount I made off this program.
So the $400 difference I can declare as capital loss. As I was really taxed "extra",
$1500 CAD was income, -$400 was capital loss (not deductible against income) ... you are saying proceeds minus ACB is $1100 ... that doesn't add up. Misphrasing something?

Proceeds minus ACB should be -$400 to be a capital loss. ACB is the FMV on the day of purchase, not the discounted price you paid.

e.g. 1 share bought for $85 (15% discount off $100 on purchase date).
1 share sold for $96

$15 taxable benefit (income0
ACB $100
$96 - $100 = -$4 capital loss
splatapus wrote: I never received $1500, only $1100.
I explained to the CRA rep that this was due to exchange rate difference on date of purchase vs. date when I sold, unlucky for me. Question solved.
no, you did receive a $1500 benefit which would have been realize if (e.g. in my example) you sold at $100 instantly
after receiving the $1500 benefit (income), you then lost $400 capital loss :)

$400 was attributable ALL to the exchange rate difference? Are you sure? That seems like a lot relative to the 15% benefit. What 2 exchange rates & dates did you use to get such a large loss only due to the exchange rate? I'd expect fluctuation in the stock price to factor the most.

Unless maybe your company reports CAD benefit based on converting the CAD to USD at really bad exchange rate some other time over the past 6-month purchase period. Do you know (or can you figure out) what rate they used to report your taxable benefit income amount -- it's possible they made a mistake there too. Or maybe you just got really unlucky with 2 dates used for exchange rates?
[OP]
Newbie
Sep 2, 2017
26 posts
17 upvotes
RaymondReddington wrote: $1500 CAD was income, -$400 was capital loss (not deductible against income) ... you are saying proceeds minus ACB is $1100 ... that doesn't add up. Misphrasing something?

Proceeds minus ACB should be -$400 to be a capital loss. ACB is the FMV on the day of purchase, not the discounted price you paid.

e.g. 1 share bought for $85 (15% discount off $100 on purchase date).
1 share sold for $96

$15 taxable benefit (income0
ACB $100
$96 - $100 = -$4 capital loss



no, you did receive a $1500 benefit which would have been realize if (e.g. in my example) you sold at $100 instantly
after receiving the $1500 benefit (income), you then lost $400 capital loss :)

$400 was attributable ALL to the exchange rate difference? Are you sure? That seems like a lot relative to the 15% benefit. What 2 exchange rates & dates did you use to get such a large loss only due to the exchange rate? I'd expect fluctuation in the stock price to factor the most.

Unless maybe your company reports CAD benefit based on converting the CAD to USD at really bad exchange rate some other time over the past 6-month purchase period. Do you know (or can you figure out) what rate they used to report your taxable benefit income amount -- it's possible they made a mistake there too. Or maybe you just got really unlucky with 2 dates used for exchange rates?
Yes, you are correct. I used the word ACB wrong in my original post.
Sr. Member
Oct 17, 2012
683 posts
518 upvotes
Vancouver
I am in an extremely similar situation to OP. All the numbers, discounts, and countries are the same as OP's scenario. The only difference is, I don't sell as soon as possible and I have been holding company shares. I understand how capital gains and losses work, at the future date/year in which I sell.

In the previous year(s), the stock has issued dividends (well under $2 per share) and these automatically are reinvested back into the ESPP program as full and/or partial shares. Is there something I am supposed to report, regarding the dividends issued? Did not receive any slips regarding this.
Deal Addict
Nov 10, 2018
2783 posts
2937 upvotes
sunnysidesolutions wrote: I am in an extremely similar situation to OP. All the numbers, discounts, and countries are the same as OP's scenario. The only difference is, I don't sell as soon as possible and I have been holding company shares. I understand how capital gains and losses work, at the future date/year in which I sell.

In the previous year(s), the stock has issued dividends (well under $2 per share) and these automatically are reinvested back into the ESPP program as full and/or partial shares. Is there something I am supposed to report, regarding the dividends issued? Did not receive any slips regarding this.
Yes, you will have to calculate your adjusted cost base as every single time a dividend is issued it adjusts your ACB, and thus you need that info to calculate your capital gains when you sell.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Sr. Member
Oct 17, 2012
683 posts
518 upvotes
Vancouver
angryaudifanatic wrote:

Yes, you will have to calculate your adjusted cost base as every single time a dividend is issued it adjusts your ACB, and thus you need that info to calculate your capital gains when you sell.
Oh okay, so as long as I don't sell, I don't need to report this aspect of it as the capital gain is not realized?
Deal Addict
Nov 10, 2018
2783 posts
2937 upvotes
sunnysidesolutions wrote: Oh okay, so as long as I don't sell, I don't need to report this aspect of it as the capital gain is not realized?
Yes but best to start getting on top of this asap.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

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