Understanding Capital Gains Tax Implications for RSUs and ESPPs

[eternum]

Hi All,

I have a question I hope someone who has experience with this can answer!

Specifically, I'm curious about when capital gains taxes are applicable to individuals who receive RSUs and ESPPs. Is it triggered upon transferring the shares from eTrade to a non-registered account (via an in-kind transfer, such as the Employee Stock Plan Outgoing Share Transfer form on eTrade), or does it occur after the in-kind transfer, when selling the shares in the non-registered account or transferring them to a registered account (such as TFSA/RRSP)?

Additionally, for those familiar with all of this, could you clarify at what price capital gains are calculated from for ESPPs? Is it based on the purchase price or the Estimated Cost Basis (per share)?



Thanks!

 

[jjamieson523]

@eternum Hard to know without knowing specifics of your plan, but typically:

• RSU’s are not really yours until they vest, and when they vest the full current market value is taxed as income. There is no CG. If you are allowed to keep the shares (without selling them) your ACB would be the value when they vest. Normally some have to be sold on vesting to cover withholding tax. Sometimes you have no choice but to sell them all as they vest.
• ESPP are shares you buy on a regular basis, and the ACB is what you paid for them as you accumulate them. The plan sponsor would have that info and keep track of it, hopefully. Ultimately, the responsibility is yours to keep track, though.

 

[eternum]

@jjamieson523 Sorry I should have mentioned these are all vested shares (I.e., they are sellable). For RSUs a certain amount is withheld for taxes and for the ESPPs they are bought with a certain percentage of my salary (after it’s been taxed).