(May 10 – 11:55 ET) – Finance Minister Paul Martin has clarified tax measures announced in the 2000 budget.
The 2000 budget proposed to allow employees to defer the income inclusion from exercising employee stock options for publicly listed shares until the disposition of the shares, subject to a $100,000 annual vesting limit. Martin confirms that employers will not be required to track dispositions of shares acquired under a stock option plan. The reporting forms will concentrate on the benefit at the time of exercise and on compliance with the $100,000 annual limit.
Martin also clarified the tax treatment of the disposition of “eligible capital property” after Feb. 28, 2000. The two-thirds inclusion rate for capital gains will apply to gains on dispositions of eligible capital property, and the existing pooling system, whereby three-quarters of the cost of such property is depreciated at 7% declining balance, will be maintained.
Martin has deferred the proposed broadening of the “thin capitalization” rules to include loans to a Canadian corporation from a third party that are guaranteed or secured by a specified non-resident. This provision will be deferred so the ministry can consult with interested parties on how to define guarantees that are equivalent to related party debt.