Tax of Sale of Shares under Employee Stock Purchase Plan (ESPP)

hydradon · ‎February 25, 2023

I'm working for a company that has ESPP, so they will keep part of my salary to purchase their stock at a 15% discount. All is handled via E*Trade and in USD. Note that I'm working in Canada and my company also has an office in Canada. Here are the details:

Grant Date: 2021, November 1
Purchase Date: 2022, April 29
Number of Shares purchased: 65
Purchase Date FMV: 51.92 USD
Discount 15% => actual Purchase Price: 44.13 USD
Acquisition Cost: 65 * 44.13 = 2,868.58 USD

My first question is:

(1) I guess the discount is treated as a taxable benefit? which is (51.92 * 65) - 2,868.58 = 506.35 USD => this amount is already included in the T4 slip and in CAD currency by my employer?

Now I also sold all of these shares:

Sale Date: 2022, May 11
Sale Price: 46.99 USD
Proceed (with minor SEC fee 0.02 USD): 46.99 * 65 - 0.02 = 3,054.33 USD

Here is where I'm confused:

(2) It seems like E*Trade calculates the Adjusted Cost Basis to be both the Acquisition Cost (2,868.58 USD) and the Discount (506.35 USD) so it would be 3,374.93 USD So the Gain/Lost would be the Total Proceed minus this ACB = 3,054.33 - 3,374.93 = -320.49 USD Do I need to report this as Capital Lost then (and in CAD) then?

(3) Since I sold the shares shortly after I got it, I guess this is considered a short-term capital gain/loss?

nkaur2 · ‎May 1, 2023

1) Yes the discount is taxable and would be on your T4.

2) correct - Your ACB should be your acquisition cost + the discount in order to avoid double taxation. Or simply the number of shares x the FMV (51.92 USD) at the time of purchase (which should be the same amount)
3) There is no short term concept in Canada, but yes there would capital gain/loss.
Could you please help with 2.

Tax of Sale of Shares under Employee Stock Purchase Plan (ESPP)

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