The tax implications depend on whether you exercise your option with a 'same-day sale' or if you use the money options exercising your stock options to immediately purchase and hold company shares. The vast majority of people exercise their options using a same-day sale. Same-day sale - With a same-day sale, the stockbroker purchases the shares on your behalf at your option price, then immediately sells them again at the market price. Your employer records a taxable benefit in box 38 of your T4 slip for the difference tax the fair market value of the cra when you exercised the option and your option price. This amount is converted to Canadian dollars using the exchange rate for the cra of exercise, and is included in employment income. It will be on your T4 slip. The option can be exercised immediately. The employer will also report a stock option deduction stock the employee's T4. When you exercise stock options, your Stock slip will also include an entry in box options or 41 for a stock option deduction. This deduction ensures that your stock option benefit gets the same tax treatment as ordinary profit on the sale of stock capital gain. When you enter the amounts from your T4 slip in the T-slips and receipts entry screen, TurboTax transfers the amount from box 38 to line of your T1 General and the amount from box 39 or 41 to line If you don't sell the stock, you still have to report the benefit in the year you exercise the options, unless you defer the taxable benefit. See Deferring the benefit for details. When you sell the shares, you may realize a capital gain or loss. You have to report the capital gain or loss in the year you dispose of the securities. Generally, you report the transaction in the "Mutual fund options and other shares including publicly traded shares" area of Schedule 3 of your return. However, if stock eligible securities are qualified small business corporation shares, stock the transaction in the "Qualified small business corporation shares" area instead. You report the transaction in the Investments Profile area in the Income section of the regular Interview. Select all the checkboxes that apply to you, including Capital Gains or Losses. In the Capital Gains Taxselect Cra stocks, bonds, real estate, or other capital property. Then, in the Stock Sales and Other Property Profile, select Sold mutual fund units and other shares including publicly traded sharesthen proceed through the interview. Or click Take Me There to go there now. When you buy shares through an employee stock program, your employer records a taxable benefit in box 38 of your T4 slipT4 slip for the difference between the fair market value of the share when you exercised the option and your option price. This amount will be converted to Canadian dollars using the exchange rate for the date of exercise, and is included in employment income. Your T4 slip will also include an entry in box 39 or 41 for a stock option deduction. Outlays and Expenses include amounts you paid to buy and sell the securities, such as stockbroker fees. Widget Corporation is not a Canadian-controlled private corporation. On February 1,Emily exercised her option to options the shares. Inwhen she was granted the option, there were no tax implications. Inwhen she bought the shares, the taxable benefit on the entire 5, shares she purchased is calculated as follows:. The taxable benefit is calculated as follows: Stock option deduction When you exercise stock options, your T4 slip will also include an entry in box 39 or 41 for a stock option deduction. If you hold the shares instead of selling them If you don't sell the stock, you still have to report the benefit in the year you exercise the options, unless you defer the taxable benefit. Then, in the Stock Sales and Other Property Profile, select Sold mutual fund units and other shares including publicly traded sharesthen proceed through the interview Or click Take Me There to go there now. Your capital gain or loss is equal to the Proceeds cra Disposition minus the Adjusted Cost Base and any Outlays and Expenses: Proceeds of Disposition is the money you received when you sold the stock. Tax calculate the adjusted cost base of your shares, add the following two amounts: Emily's tax implications are as follows: Inwhen she bought the shares, the taxable benefit on the entire 5, shares she purchased is calculated as follows: Inwhen she sells the shares: Related concepts Deferring the benefit from exercising stock options until you sell them. Tax do I enter income from selling ESPP shares?
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