What taxable employment benefit could my equity create?

RSUs are generally taxed as employment income when they vest and the employee becomes entitled to the shares or cash value, subject to the plan structure. Subsequent growth or decline after the shares are acquired can create a capital gain or loss when the shares are sold.

Employee stock options can create a taxable employment benefit when exercised or when shares are disposed of, depending on whether the employer is a Canadian-controlled private corporation and other rules. An employee stock-option deduction may be available when the statutory conditions are met.

RSUs generally deliver value without requiring an exercise price and are commonly taxed as employment income at vesting. Options give the right to buy shares at a specified price, so the taxable benefit depends on the share value relative to the exercise price and the applicable rules.

The same value is not intended to be taxed twice, but two different tax events can occur: employment income may arise when RSUs vest, and a later capital gain or loss may arise on the change in value between acquisition and sale.

You may have a capital gain or loss on the difference between the shares’ adjusted cost base after vesting and the sale proceeds. The value already included as employment income generally forms part of the cost base used for that later calculation.