Wednesday, May 27, 2009

Earl Flormata - Your Tax System Fails yet again

Ok - back to that common sense not so common thread, an antiquated rule in taxation strikes Canadians who tried to create some profits in purchasing stock through their employee stock programs.

Imagine - if you purchase stock valued at $1, but you get a discount at say 50 cents. Now one share doesn't hurt so much, but let's say we work at $100,000 for a nice round number. $50,000 is what you've got to put up on the block, to realize $50,000 of capital gains.

Now with the financial downturn, let's put the value of the stock for those that held on to say... 10 cents on the dollar. In simple terms, you bought an asset worth 100k for 50k, which was a great deal up until the asset lost value to a net value of 10k. To add insult to injury - the tax payer, our peer is still liable for 50k in capital gains tax.

Waaait a minute - that doesn't seem fair now does it? - I'm thinking at least if it's within the same calendar year in terms of taxation - or perhaps even within the tax filing period, there should be a net result equation. In this case, there should be a claimable capital loss of 40k against any winning investments, or even against income.

What's worse, we're the only G7 country to not implement a law that protects our citizens against such financial downturns such as this... what's the procedure to get something like this moving? I think I'll call my local MP to find out what we can do to make this change happen. With people losing their jobs as a final kick while they're down - something has to be done to stop the bleeding.

Here's a link to another article on the same topic: Phantom Income

Thanks for Reading,
Earl Flormata