Employee Stock Options

You can add employee stock options to accounts not owned by a CCPC. These can be in CAD, USD and any other currency but cryptocurrencies, and you will see that option in the types of investments to chose from.

For options in publicly traded companies, you can select the ticker as if you were adding the stock, otherwise please give a name to the option.

You will be asked to enter a date for when you plan to exercise the options, and the exercise price. In the TIME MACHINE, only the capital gains rate will apply to growth of the value of the underlying stock price until the exercise date. It will then exercise the option by making a cashless transaction. That means, that if the option has value (the stock price is higher that the exercise price), it will buy that value of shares at the current market price, and this value will set adjusted cost base of the investment. We do not yet allow to add funds to your account to allow you to exercise additional shares at the exercise price.

Once the options are exercised, the shares will behave as the underlying stock, so any growth, dividends and fees to sell will only apply from that point on. The TIME MACHINE may then also sell the investment as needed according to your PRIORITIES and AUTOMATIC SAVINGS/WITHDRAWALS, but will never add to it unless to reinvest dividends if set to.

For very large and publicly traded companies, taxes will apply for the year of exercise. The value of the options exercised is added to the taxable income of the owner but then can be reduced by an Employment Benefit of 50%. A recently implemented tax change puts an annual limit of $200,000) on employee stock option grants (based on the fair market value of the underlying shares at the time of the option grant) that qualify for the 50% Employment Benefit. Any value above that limit in a year is added as 100% taxable income. The TIME MACHINE enforces the new limit and adds to the option owner's taxable income appropriately.

If the options are those for stock in a private company, particularly a CCPC, the taxation may be delayed to when the shares are actually sold. The shares must have been held for two years to get the 50\% Employment Benefit (the TIME MACHINE enforces that the shares are not sold for at least 2 years), but there is no annual limit on the grants eligible for that benefit. If you have not entered a stock ticker for the options, you will be asked to specify if the options qualify for that tax treatment by setting it to be a CCPCOption (it does not strictly have to be a CCPC). Note that for Québec, there can be some companies that will only qualify for a 25% Employment Benefit and this is not considered here as it seems to apply rarely, but please contact us if it applies to your options.

The app will modify the name of the options in your investment list to include the exercise date. You should enter a separate investment for each exercise date in the case that you have options that vest at different dates. For publicly-traded companies we follow with Fundata, the value of the options will be updated nightly automatically, otherwise you will need to update the stock price yourself. You should also delete options that are past their exercise date as it must be in the future.