Question

G is employed by a Canadian-controlled private corporation. In year 1, G was granted a stock option to acquire 4,000 shares from the treasury of his employer’s corporation for $7 a share. At the time of receiving the option, the shares were valued at $13 per share. In year 3, G exercised his option and purchased 4,000 shares for $28,000. At the purchase date in year 3, the shares were valued at $12 per share. In year 6, G sold 4,000 shares for $17 per share. What amount is included in G’s overall taxable income in year 6?

Answer 1

G bought the option of 4000 shares. In year 3 Shones G bought the option of 4000 $28000 for Baging pria = 4000 shares X $ 7 (option) - $28000 In year 6 old the option of 4000 shares of $17 per share selling price of option a 4000 shares X 817 =868000 .: Income from sale of shares = 868000-$28000 = $ 40,000 This amount is included m a's overall het income for tax purpose in the year '6' is calculated below: - $ 40,000 - $ 40.000 (6 geass - 3 years) 3 years = $ 13333.33 Net Income for tax purpose in the year 6 is $ 13,333. 33