A TAXPAYERS BILL OF RIGHTS
By Victor Drummond ©
It will no doubt come as a welcome bit of news that the current Government has announced the creation of a Canadian Taxpayers “Bill of Rights” and the creation of a Federal Ombudsman to keep the Canadian Revenue Agency Polite and civil in it’s dealings with the Canadian Taxpayer.
Time will tell just how much of a benefit these two events will be to the victims of the legalized robbery tolerated for so many years under the former government in power.
The treatment of all those who were taxed on “Benefits” they never saw and denied the same tax relief given the JDS employee’s in British Columbia, in 2006, are a clear violation of the “Equality” rights already provided in article 15(1) of the “Canadian Charter of Rights and Freedoms.”
If no authority in the current government is prepared to act spontaneously to rectify this violation what good is another “Bill of Rights” going to do? And what good is a Federal Ombudsman who has no authority to amend articles in the Canadian Income Tax Act, that allows taxpayers to be taxed on potential gains, going to do?
If you are as outraged as I am about this fiasco you can contact your Member of Parliament via the following URL and/or write to your member of Parliament postage free at the address accessible from this same URL :-
http://webinfo.parl.gc.ca/MembersOfParliament/MainMPsAddressList.aspx?TimePeriod=Current&Language=E
To obtain your MP’s E-mail address click on his or her Name Link on the foregoing URL and let them know how you feel about this poor excuse of a fix of the “Taxable Benefits” problem.
Adding more ineffective players to the team is not the solution. Changing the Tax Laws to exclude articles of intangible value, (such as corporation shares), from the “Taxable Benefits” classification doesn’t require more team players – or anyone with more than a minimum sense of “Fair Taxation”.
Victims of the Taxable Benefits robbery have always had the option of taking their case
to the “Tax Court of Canada”.
This organization will allow individuals to present their arguments, with, or without, legal representation.
In both cases the person taking their case to this court is likely throwing good money after bad.
This is the same option provided by the new Taxpayers Bill of Rights and/or the New Ombudsman. Great News?
Victor
Thursday, May 31, 2007
The Education of Jennifer Jones
The Education of Jennifer Jones
A Fable to Illustrate Very Real Unfair Taxation
In Canada
©
Written by Victor Drummond
March 28 2007
Although Walter had been born and raised on a farm he found his interests and aptitudes more suited to science and technology. So when his father passed away he declined to take over the farm and gave title to the property to his younger brother William.
Walter met the love of his life, Janet MacIntosh, at a church picnic in the fall of 1983 and they married in June of 1984. Their first, and only child, Jennifer, was born in November 1985, and was instantly their pride and joy. Not only did Jennifer grow to be the antithesis, of the dumb blond syndrome, she was both beautiful and highly intelligent.
Jennifer was at the head of her class, all through public and high school, and was nominated valedictorian in her final year at high school. Her uncle, William Jones, was so proud of Jennifer that he opened a trust account of $20,000 to finance her University education and he named Jennifer’s father, Walter, as Trustee.
After leaving the farm Walter took courses at the University of Waterloo. Upon graduation, with a Master’s degree, he went to work for Bell Northern Research Laboratories (BNR), in Ottawa and was assigned to a Fibre-optic research project.
Walter’s expertise in the field of fibre-optics soon came to the attention of other researchers, formerly with the BNR Labs, and he was offered a position with a company they had formed: i.e. – JDS Optics Incorporated. The deal offered Walter the same take-home pay and an opportunity to grow with a young company that had demonstrated remarkable growth from the day it was formed.
Among other employees Walter was encouraged to buy shares in the company. The shares were not trading, on any established stock exchange. Consequently the price per share was volatile and subject to unpredictable changes in value. Because the JDS Optics Inc. was a Canadian Controlled Private Corporation, (CCPC), any shares given, or sold to company employees were classed as a Capital Investment by Revenue Canada. Therefore Walter’s Income tax would not be affected by the gift, or discount purchase, of shares in his employer’s company -- unless he later sold them and realized a profit.
Being a total novice in the area of trading shares Walter declined, at first, to purchase any shares -- of any kind.
After seeing fellow employees make handsome profits, through participation in company shares Option Plans, Walter
eventually changed his mind and decided to participate in the next offering(s) of company stock.
About that time JDS Optics Inc. found it expedient to merge with a subsidiary of the Furukawa Corporation of Tokyo Japan. The subsidiary company was the Fitel Optics Corporation and the merged company then became incorporated as JDS Fitel Inc.
Furukawa Incorporated also acquired a 51% interest in JDS Fitel causing the latter to lose its CCPC status. Now if the company gave, or sold, its shares to its employees the shares would be classed as a “Taxable Benefit” by Revenue Canada. From then on any price advantage the employees might be given, at the time of purchase, and/or at the time of receipt of the shares, is added to their “Employment Income” at the current “Inclusion Rate”. This action produced a higher tax rate on their real income plus the potential income, (seldom actually realized), for each share they purchased.
Walter signed all succeeding Option Plan agreements and began to buy as many shares as his contracts allowed. To pay for these shares he took out a second mortgage, on his home, and withdrew the $20,000 from Jennifer’s Education trust.
He was thrilled when his holdings more than doubled in the first year. He signed the next option plan and watched with great anticipation as the company shares split 2 for 1 several times and continued to climb in value per share year after year. In July 2000 Walter owned 2,600 shares of JDSU stock which was then trading at: $1,350 per share. He had another 400 shares on purchase that would be delivered in March 2001-- at which time Walter planned to sell out the total 3000 shares, pay off his loans and take a vacation with his family.
Unfortunately by January 2001 JDSU shares had fallen in value to less than half the value they had the previous July. Walter then decided to wait for the next upturn in JDSU share value before selling his shares. By March 2001 the value of JDSU shares had fallen by another 50% and were then trading in the $250.00 per share range. Walter’s 3000 shares were now only worth : 3000 x 250 = $750,000. This amount would not cover the total debt he owed on:- his mortgages, deferred Taxes and Jennifer’s Education Trust Fund. If he sold the shares now it would trigger the deferred tax debt so Walter decided to wait out the market decline and sell out as soon as he could break even -- or close to break even.
The awaited market recovery never materialized and by the end of 2002 JDSU shares were trading around $20.00
each making Walters holdings worth a total of: 3000 x 20 - $60,000. He could not actually realize even this amount of money because if he sold his shares the proceeds would not cover half the outstanding deferred tax that the sale would trigger.
To add insult to injury Walter was released from the employment of JDS Uniphase during the downsizing of the company in 2003. His termination bonus barely covered the overdue mortgage payments and Walter was left financially decimated.
Walter’s brother, William, was so angry with Walter, over the loss of Jennifer’s education fund that he would no longer speak to him. Walter’s wife, Janet, was also very upset with him but went out to find a job to help keep the family with a roof over their head, and clothed and fed. Jennifer, however, moved away from home to a place of her own and went out to work. She then applied for a co-operative course at Waterloo University. Jennifer can achieve her University education by taking work assignments between semesters. It will take her a couple of years longer – but she will eventually get the education she so richly deserves. No Thanks to Revenue Canada.
====================================================================
Authors Comment:-
Although this story is partly fiction it is typical of events that actually happened to thousands of honest, hard working, Canadians. How would you feel if your employer rewarded you with company shares, for outstanding performance, only to end up owing Revenue Canada considerably more money than the shares were actually totally worth when you sold them?
If you want to see the Canadian Government level the playing field and provide the same rules to every Canadian Taxpayer post a comment and/or send a copy of this article to anyone you know that may have been a victim of unfair taxation and/or send me an E-mail:- vic.drummond@sympatico.ca
Victor Drummond ©
A Fable to Illustrate Very Real Unfair Taxation
In Canada
©
Written by Victor Drummond
March 28 2007
Although Walter had been born and raised on a farm he found his interests and aptitudes more suited to science and technology. So when his father passed away he declined to take over the farm and gave title to the property to his younger brother William.
Walter met the love of his life, Janet MacIntosh, at a church picnic in the fall of 1983 and they married in June of 1984. Their first, and only child, Jennifer, was born in November 1985, and was instantly their pride and joy. Not only did Jennifer grow to be the antithesis, of the dumb blond syndrome, she was both beautiful and highly intelligent.
Jennifer was at the head of her class, all through public and high school, and was nominated valedictorian in her final year at high school. Her uncle, William Jones, was so proud of Jennifer that he opened a trust account of $20,000 to finance her University education and he named Jennifer’s father, Walter, as Trustee.
After leaving the farm Walter took courses at the University of Waterloo. Upon graduation, with a Master’s degree, he went to work for Bell Northern Research Laboratories (BNR), in Ottawa and was assigned to a Fibre-optic research project.
Walter’s expertise in the field of fibre-optics soon came to the attention of other researchers, formerly with the BNR Labs, and he was offered a position with a company they had formed: i.e. – JDS Optics Incorporated. The deal offered Walter the same take-home pay and an opportunity to grow with a young company that had demonstrated remarkable growth from the day it was formed.
Among other employees Walter was encouraged to buy shares in the company. The shares were not trading, on any established stock exchange. Consequently the price per share was volatile and subject to unpredictable changes in value. Because the JDS Optics Inc. was a Canadian Controlled Private Corporation, (CCPC), any shares given, or sold to company employees were classed as a Capital Investment by Revenue Canada. Therefore Walter’s Income tax would not be affected by the gift, or discount purchase, of shares in his employer’s company -- unless he later sold them and realized a profit.
Being a total novice in the area of trading shares Walter declined, at first, to purchase any shares -- of any kind.
After seeing fellow employees make handsome profits, through participation in company shares Option Plans, Walter
eventually changed his mind and decided to participate in the next offering(s) of company stock.
About that time JDS Optics Inc. found it expedient to merge with a subsidiary of the Furukawa Corporation of Tokyo Japan. The subsidiary company was the Fitel Optics Corporation and the merged company then became incorporated as JDS Fitel Inc.
Furukawa Incorporated also acquired a 51% interest in JDS Fitel causing the latter to lose its CCPC status. Now if the company gave, or sold, its shares to its employees the shares would be classed as a “Taxable Benefit” by Revenue Canada. From then on any price advantage the employees might be given, at the time of purchase, and/or at the time of receipt of the shares, is added to their “Employment Income” at the current “Inclusion Rate”. This action produced a higher tax rate on their real income plus the potential income, (seldom actually realized), for each share they purchased.
Walter signed all succeeding Option Plan agreements and began to buy as many shares as his contracts allowed. To pay for these shares he took out a second mortgage, on his home, and withdrew the $20,000 from Jennifer’s Education trust.
He was thrilled when his holdings more than doubled in the first year. He signed the next option plan and watched with great anticipation as the company shares split 2 for 1 several times and continued to climb in value per share year after year. In July 2000 Walter owned 2,600 shares of JDSU stock which was then trading at: $1,350 per share. He had another 400 shares on purchase that would be delivered in March 2001-- at which time Walter planned to sell out the total 3000 shares, pay off his loans and take a vacation with his family.
Unfortunately by January 2001 JDSU shares had fallen in value to less than half the value they had the previous July. Walter then decided to wait for the next upturn in JDSU share value before selling his shares. By March 2001 the value of JDSU shares had fallen by another 50% and were then trading in the $250.00 per share range. Walter’s 3000 shares were now only worth : 3000 x 250 = $750,000. This amount would not cover the total debt he owed on:- his mortgages, deferred Taxes and Jennifer’s Education Trust Fund. If he sold the shares now it would trigger the deferred tax debt so Walter decided to wait out the market decline and sell out as soon as he could break even -- or close to break even.
The awaited market recovery never materialized and by the end of 2002 JDSU shares were trading around $20.00
each making Walters holdings worth a total of: 3000 x 20 - $60,000. He could not actually realize even this amount of money because if he sold his shares the proceeds would not cover half the outstanding deferred tax that the sale would trigger.
To add insult to injury Walter was released from the employment of JDS Uniphase during the downsizing of the company in 2003. His termination bonus barely covered the overdue mortgage payments and Walter was left financially decimated.
Walter’s brother, William, was so angry with Walter, over the loss of Jennifer’s education fund that he would no longer speak to him. Walter’s wife, Janet, was also very upset with him but went out to find a job to help keep the family with a roof over their head, and clothed and fed. Jennifer, however, moved away from home to a place of her own and went out to work. She then applied for a co-operative course at Waterloo University. Jennifer can achieve her University education by taking work assignments between semesters. It will take her a couple of years longer – but she will eventually get the education she so richly deserves. No Thanks to Revenue Canada.
====================================================================
Authors Comment:-
Although this story is partly fiction it is typical of events that actually happened to thousands of honest, hard working, Canadians. How would you feel if your employer rewarded you with company shares, for outstanding performance, only to end up owing Revenue Canada considerably more money than the shares were actually totally worth when you sold them?
If you want to see the Canadian Government level the playing field and provide the same rules to every Canadian Taxpayer post a comment and/or send a copy of this article to anyone you know that may have been a victim of unfair taxation and/or send me an E-mail:- vic.drummond@sympatico.ca
Victor Drummond ©
Wednesday, May 23, 2007
There is No fairness in Taxing Imaginary Gains.
Ken Chapman of blogscanada.ca, e-group writes:- (Comment on Globe & Mail Article -- Harper Claims Parliamentary Priviledge Immunity from Lawsuit)
I will follow this matter carefully and post on it as it develops. In the meantime let’s hope for principles of democracy and fairness and transparency and accountability will be honoured by the Harper government. And lets watch this carefully since it is an opportunity for citizens to judge the quality of character and capacity for governance of the current minority government and its leader…and our pro tem Prime Minister. The Cons ought to be providing a full public disclosure as a matter of course just so we ordinary little-people citizens can come to an informed decision if we can trust these people to represent and govern us.
Well Said Ken -- A victim of the Taxable Benefits booby trap has told me that he met Paul Martin in person and Paul said words to the effect that he would have tried to correct the "Taxable Benefits" inequity had his party remained in power.
What is so difficult about correcting a mistake in the classification of corporation shares from a "Potential Taxable Benefit" to a "Real Capital Gain or Loss?"
The obstacle appears to be money -- Revenue Canada has a few billions of dollars in their "Accounts Receivable" ledger -- much of which is deferred taxes on non-existant gains.
Everyone knows this tax is grossly unfair -- but those who can make things right decline to correct the on-going oppression -- and the only reason that makes sense -- is the cost issue.
So Honesty, Fairness and Justice in governemnt have their price.
As Ken Chapman said:- "...so we little-people, citizens can make an informed decision if we can trust these people to represent and govern us."
There will be another federal election before long -- and I implore you to demand more from your government than a series of hollow promises. No commitment to correct this unfair tax issue means no vote.
Victor
I will follow this matter carefully and post on it as it develops. In the meantime let’s hope for principles of democracy and fairness and transparency and accountability will be honoured by the Harper government. And lets watch this carefully since it is an opportunity for citizens to judge the quality of character and capacity for governance of the current minority government and its leader…and our pro tem Prime Minister. The Cons ought to be providing a full public disclosure as a matter of course just so we ordinary little-people citizens can come to an informed decision if we can trust these people to represent and govern us.
Well Said Ken -- A victim of the Taxable Benefits booby trap has told me that he met Paul Martin in person and Paul said words to the effect that he would have tried to correct the "Taxable Benefits" inequity had his party remained in power.
What is so difficult about correcting a mistake in the classification of corporation shares from a "Potential Taxable Benefit" to a "Real Capital Gain or Loss?"
The obstacle appears to be money -- Revenue Canada has a few billions of dollars in their "Accounts Receivable" ledger -- much of which is deferred taxes on non-existant gains.
Everyone knows this tax is grossly unfair -- but those who can make things right decline to correct the on-going oppression -- and the only reason that makes sense -- is the cost issue.
So Honesty, Fairness and Justice in governemnt have their price.
As Ken Chapman said:- "...so we little-people, citizens can make an informed decision if we can trust these people to represent and govern us."
There will be another federal election before long -- and I implore you to demand more from your government than a series of hollow promises. No commitment to correct this unfair tax issue means no vote.
Victor
Thursday, May 17, 2007
WHAT IS YOUR VOTE WORTH?
Barring any unforseen difficulties there will be a Federal election in the near future.
There are all kinds of would-be Members of Political Parties campaigning for your vote.
This money will be used to inform you of the wonderful things their party and they personally will do to make your world a better place.
Each one of them will be putting up all the money they can afford, and/or all the money the election rules will allow, in order to win over your vote. Therefore your vote is valuable -- in terms of money alone.
Your vote is worth much more, however, in terms of the power it gives you the voter to demand honest government.
Heaven forbid that any politician would make a false promise, or tell deliberate lies in order to, rob you of your vote and, try to gain power under false pretences.
If such a thing happened, however, would you vote for the same person, or party again?
What if a political party campaigned on the promise to give the Canadian Public Fair Taxes?
Does it concern you that some Canadians are given tax relief that the others in identical conditions are denied?
Do not throw away your opportunity to make the elected party live up to their promises.
Get out and vote -- and make your vote count -- only vote for the person and/or party that keeps their promises -- or that recognizes unfair policies or practices and corrects them without coercion.
If you do not use your vote, or use it indiscriminently, then you have no one to blame but yourself for encouraging any party, in power, to fleece you like the political sheep that you are.
Victor Drummond
E-mail:- vic.drummond@sympatico.ca
There are all kinds of would-be Members of Political Parties campaigning for your vote.
This money will be used to inform you of the wonderful things their party and they personally will do to make your world a better place.
Each one of them will be putting up all the money they can afford, and/or all the money the election rules will allow, in order to win over your vote. Therefore your vote is valuable -- in terms of money alone.
Your vote is worth much more, however, in terms of the power it gives you the voter to demand honest government.
Heaven forbid that any politician would make a false promise, or tell deliberate lies in order to, rob you of your vote and, try to gain power under false pretences.
If such a thing happened, however, would you vote for the same person, or party again?
What if a political party campaigned on the promise to give the Canadian Public Fair Taxes?
Does it concern you that some Canadians are given tax relief that the others in identical conditions are denied?
Do not throw away your opportunity to make the elected party live up to their promises.
Get out and vote -- and make your vote count -- only vote for the person and/or party that keeps their promises -- or that recognizes unfair policies or practices and corrects them without coercion.
If you do not use your vote, or use it indiscriminently, then you have no one to blame but yourself for encouraging any party, in power, to fleece you like the political sheep that you are.
Victor Drummond
E-mail:- vic.drummond@sympatico.ca
Monday, May 14, 2007
HELP WANTED!
For a person looking for a job "Help Wanted" is a welcome sign.
For a weary charity worker the same sign may be just a bit too much.
For the average person, content with the status quo, the sign is of no interest whatsoever.
For a person in a precarious situation the sign is a call for help. The greater the threat to the person in trouble -- the more urgent the need for immediate assistance becomes.
The source of the assistance depends greatly upon the skills and resources required to provide help needed. A fallen mountain climber, for example, may require another person with mountain climbing skills to get them out of their life threatening situation.
Others may be more than willing to give of their time and money to assist the victim but these resources are useless in this specific situation.
Well:- It has come to our attention (that) there is a significant number of Canadians who are victims of an unfair tax system -- specifically those persons who were induced to participate in their employer's shares options plans .
Are these persons victims of the Canadain tax system or are they in difficulty due to their own fault(s).
While a very few may be the authors of their own misfortune -- by far the largest number are victims of a booby trap constructed by the classification of shares obtained, via the options plans, as a "Taxable Benefit" -- even when no benefit was realized.
Huge taxes were imposed on gains that were only a theoretical possibility. These victims were encouraged to participate in their employer's options plans in order to assist their employer to have their shares trade in larger volume and have money come back into the business where all should benefit.
Many victims were left financially destitute and oweing the Canada Revenue Agency more money than they ever obtained from shares and employment income combined.
Do they deserve help? -- Yes they do and there are many people qualified to provide the necessary assistance.
In order of responsibility here are the people and agencies most able and responsible to provide the needed assistance.
1. The Government of Canada -- Should level the playing field by passing legislation to remove all items of intangible value -- such as shares and stock options -- from the "Taxable Benefits" classification. This should be done retroactively and allow all victims of present and past taxation on phantom gains to resubmit their tax returns on the basis of "Capital Gains" not "Taxable Benefits".
2. The voters of Canada -- who have the power to tell all candidates for Federal Office in Canada that they will not get their support unless they commit to providing "REAL -- FAIR TAXATION" in Canada.
3. All other Victims of the "Taxable Benefits" rip-off. Send me an account of your experience with Revenue Canada, or any other agency, and tell me if you would like to have your story posted on this blog page as "A Letter to the Editor". (anonmously if you prefer.)
Read the "Letter to the Editor" already posted on this web page and realize that so long as one Canadian is victimized in this way -- no one is safe -- not even you.
Respond to the "HELP WANTED" Sign that this letter conveys -- it won't cost even the price of a stamp -- and every Canadian will benefit.
Victor Drummond
PS:- If you would like to contribute your comment(s) but do not wish to register on this blog page then send me an email and tell me if you want to have your remarks posted on this blog page and whether or not you prefer to have your identity kept secret.
E-mail vic.drummond@sympatico.ca
For a weary charity worker the same sign may be just a bit too much.
For the average person, content with the status quo, the sign is of no interest whatsoever.
For a person in a precarious situation the sign is a call for help. The greater the threat to the person in trouble -- the more urgent the need for immediate assistance becomes.
The source of the assistance depends greatly upon the skills and resources required to provide help needed. A fallen mountain climber, for example, may require another person with mountain climbing skills to get them out of their life threatening situation.
Others may be more than willing to give of their time and money to assist the victim but these resources are useless in this specific situation.
Well:- It has come to our attention (that) there is a significant number of Canadians who are victims of an unfair tax system -- specifically those persons who were induced to participate in their employer's shares options plans .
Are these persons victims of the Canadain tax system or are they in difficulty due to their own fault(s).
While a very few may be the authors of their own misfortune -- by far the largest number are victims of a booby trap constructed by the classification of shares obtained, via the options plans, as a "Taxable Benefit" -- even when no benefit was realized.
Huge taxes were imposed on gains that were only a theoretical possibility. These victims were encouraged to participate in their employer's options plans in order to assist their employer to have their shares trade in larger volume and have money come back into the business where all should benefit.
Many victims were left financially destitute and oweing the Canada Revenue Agency more money than they ever obtained from shares and employment income combined.
Do they deserve help? -- Yes they do and there are many people qualified to provide the necessary assistance.
In order of responsibility here are the people and agencies most able and responsible to provide the needed assistance.
1. The Government of Canada -- Should level the playing field by passing legislation to remove all items of intangible value -- such as shares and stock options -- from the "Taxable Benefits" classification. This should be done retroactively and allow all victims of present and past taxation on phantom gains to resubmit their tax returns on the basis of "Capital Gains" not "Taxable Benefits".
2. The voters of Canada -- who have the power to tell all candidates for Federal Office in Canada that they will not get their support unless they commit to providing "REAL -- FAIR TAXATION" in Canada.
3. All other Victims of the "Taxable Benefits" rip-off. Send me an account of your experience with Revenue Canada, or any other agency, and tell me if you would like to have your story posted on this blog page as "A Letter to the Editor". (anonmously if you prefer.)
Read the "Letter to the Editor" already posted on this web page and realize that so long as one Canadian is victimized in this way -- no one is safe -- not even you.
Respond to the "HELP WANTED" Sign that this letter conveys -- it won't cost even the price of a stamp -- and every Canadian will benefit.
Victor Drummond
PS:- If you would like to contribute your comment(s) but do not wish to register on this blog page then send me an email and tell me if you want to have your remarks posted on this blog page and whether or not you prefer to have your identity kept secret.
E-mail vic.drummond@sympatico.ca
Saturday, May 12, 2007
A Letter to the Editor
Following is a copy of a letter I received from a victim of the:- "Taxable Benefits" boondoggle foisted upon innocent Canadians who were unfortunate enough to be caught in the booby trap set in place by Revenue Canada classing employers shares as a "Taxable Benefit".
It is a long document but well worth your time if you care about honest and fair taxation.
vic.drummond@sympatico.ca
Sent
May 12, 2007 6:29:51 PM
To :
vic.drummond@sympatico.ca
Subject :
A Letter to ther Editor -- Caveat Emptor
Dear Sir,
I believe we all are aware, under the current law, those 10,000+ Canadians who are unfortunate enough to have been blindsided by the ESO debacle have a tax deferral until the year in which they dispose of the securities, become a non-resident, or die, whichever is earlier. It is, at best, by any other name, a postponement of the inevitable financial hardship. I appreciate how back in 2000 the Tax department and Government rushed to arrive at this "solution" to an unforeseen and massive issue brought about by the incredible event called the .com stock price bubble. The Tax department recognized the unfolding mess and made some hasty changes to allow for what was clearly unfair exisiting legislation. Unfortunately the revisions that they made to the tax policy turned out to be flawed and nothing more than a stop gap solution to a problem that was and is not going away. As described above it is a simply a postponed problem ... until one of those triggers is pulled. Ultimately, the allowances provided in the law are not a real remedy at all. I do not believe that more than a small handful of those affected by the ESO laws would have consciously made the decision to place themselves in this tax trap and risk playing the market gain/risk game. I certainly did not and I have long since come to terms with my ignorant blunder. The .com era in which this mess originated was an unforeseen, phenomenal and short period of history that few were prepared for or understood the consequences of it - the government and Tax Department included.
For the past 6 years I have been in the described deferral situation, doing the best I could to prepare and safeguard my families financial welfare. The stress and fear and anxiety that my wife and I have carried over the years has been incredible. Over this extended period of time I have been hopeful that the two different Governments in power would act on their various promises and the protests of complaint from those affected and penalized. I have believed that those responsible for equitable tax policy would use their good sense and change the laws and provide some relief, as there really is no adequate way to prepare for a shocking surprise debt of this magnitude. I have been protecting my family against being financially destroyed by my untimely death, by buying extra life insurance to cover the inevitable debt. I have turned down several job offers in the USA which would have required me to move and most important of all – never selling one single share of the stock that I acquired from ESO’s … as this would trigger a massive debt on profits I would never see. It is also critically important for all those who purport a stake in the discussion, especially the Tax department, to recognize the distinction of the position I was in as a senior executive of a public company and I am ruled by stock trading governance that applies to all manner of actions, events and executive behavior.
These rules apply to regular predictable events and also other ad hoc events that happen as matter of business course. The most signifgant regular events are stock trading black out periods that, based on the guidelines and advice provided to me, it was illegal for me to buy to sell company stock for a period of one month before and one month after quarterly financial results were to be released. As a result my best case stock trading window was reduced to a total of 4 months out of 12. In addition the company was actively negotiating the acquisition of several companies in this period of time and over these lengthy periods of negotiations stock trading is forbidden as well. In one such "quiet or blackout period" the first one immediately following the date I exercised the ESO's that created this mess, the stock value fell by 50% in a period of 6 months during which it would have been illegal for me to sell any stock.
Fundamentally this is all wrong and in short, my opportunity to sell stock, under the "he choose to accept the market risk argument" was more than 75% less than someone who was not an insider. As a result my opportunity to play the market, should I have chosen to do so, was dramatically crippled and therefore it is clearly unfair for the same tax principles to be applied to the two very different circumstances. As of March 2007 however the deferral situation I have been in for the past 6 years has ended and my situation has gone from a pregnant and inevitable yet deferred liability to an actual realized debt. Through no fault or action of my doing the deferral has ended and I now owe tax on a fictitious “deemed disposition” equal to $1,225,350 … or roughly a $280,000 tax bill. This has occurred as a result of the public company in which the stock was held “went private”. In doing so they forced me to sell them all the stock that I had in the company and created a real disposition. They have paid me a total of $54,050 for the affected shares. Obviously I did not wish or intend for this to happen and had no control over it coming to fruition. In short I did not end the deferral - they did - against my wishes. So what I am looking for now is some guidance and advice and support.
I need to find away to regain the deferral or find some reasonable exit from this extremely unfair, unnecessary, trying and stressful saga. I have always been an extremely proud Canadian as I have seen it as a fair-minded country managed by reasonable people whose agendas are driven by common sense and doing what is right. I have been losing faith over the past 6 years in the institutions that affect me in this regards, given their refusal to accept the ESO situation in general as being ill founded and fundamentally unfair. My case has now gone from that to a very real and pressing tax liability problem. Clearly there are various schools of thought, differing opinions, many issues in play and nuances of great variety on the subject but, I can tell you one thing for sure.
Any fair minded person who the situation is explained to universally says “that is ridiculous – how can they expect you to pay tax or something you never had ?”. At the end of the day, regardless of how I arrived at this point of concern, I will be faced with first paying tax on the $54,050 in proceeds from the forced sale and then paying the Aprox $280,000 in taxes on the phantom profits I never made. That is simply not right or fair. It is ill conceived, ludicrous in it's logic, onerous in it's application and a change must be made. I urgently need some relief assistance now that the deferral period of reprieve from these taxes on phantom profits has been triggered. There are at least 10,000 people in Canada with an ESO Tax deferral ... ticking away waiting to explode, providing unjustified windfall tax profits to the government. In the interest of doing what is right and fair and just how can this be ignored ? Your support, guidance and assistance would be much appreciated. I need to know what avenues are open to me and what steps I need to take before I am forced into a very real financial disaster. Could you please take some time to consider my new situation and let me know your thoughts and what next steps I should take.
Sincerely,
(Name witheld for present)
Similar letters have been sent to sitting members of parliament without visible results so far.
Is this the kind of Government you want?
Victor
email:- vic.drummond@sympatico.ca
It is a long document but well worth your time if you care about honest and fair taxation.
vic.drummond@sympatico.ca
Sent
May 12, 2007 6:29:51 PM
To :
vic.drummond@sympatico.ca
Subject :
A Letter to ther Editor -- Caveat Emptor
Dear Sir,
I believe we all are aware, under the current law, those 10,000+ Canadians who are unfortunate enough to have been blindsided by the ESO debacle have a tax deferral until the year in which they dispose of the securities, become a non-resident, or die, whichever is earlier. It is, at best, by any other name, a postponement of the inevitable financial hardship. I appreciate how back in 2000 the Tax department and Government rushed to arrive at this "solution" to an unforeseen and massive issue brought about by the incredible event called the .com stock price bubble. The Tax department recognized the unfolding mess and made some hasty changes to allow for what was clearly unfair exisiting legislation. Unfortunately the revisions that they made to the tax policy turned out to be flawed and nothing more than a stop gap solution to a problem that was and is not going away. As described above it is a simply a postponed problem ... until one of those triggers is pulled. Ultimately, the allowances provided in the law are not a real remedy at all. I do not believe that more than a small handful of those affected by the ESO laws would have consciously made the decision to place themselves in this tax trap and risk playing the market gain/risk game. I certainly did not and I have long since come to terms with my ignorant blunder. The .com era in which this mess originated was an unforeseen, phenomenal and short period of history that few were prepared for or understood the consequences of it - the government and Tax Department included.
For the past 6 years I have been in the described deferral situation, doing the best I could to prepare and safeguard my families financial welfare. The stress and fear and anxiety that my wife and I have carried over the years has been incredible. Over this extended period of time I have been hopeful that the two different Governments in power would act on their various promises and the protests of complaint from those affected and penalized. I have believed that those responsible for equitable tax policy would use their good sense and change the laws and provide some relief, as there really is no adequate way to prepare for a shocking surprise debt of this magnitude. I have been protecting my family against being financially destroyed by my untimely death, by buying extra life insurance to cover the inevitable debt. I have turned down several job offers in the USA which would have required me to move and most important of all – never selling one single share of the stock that I acquired from ESO’s … as this would trigger a massive debt on profits I would never see. It is also critically important for all those who purport a stake in the discussion, especially the Tax department, to recognize the distinction of the position I was in as a senior executive of a public company and I am ruled by stock trading governance that applies to all manner of actions, events and executive behavior.
These rules apply to regular predictable events and also other ad hoc events that happen as matter of business course. The most signifgant regular events are stock trading black out periods that, based on the guidelines and advice provided to me, it was illegal for me to buy to sell company stock for a period of one month before and one month after quarterly financial results were to be released. As a result my best case stock trading window was reduced to a total of 4 months out of 12. In addition the company was actively negotiating the acquisition of several companies in this period of time and over these lengthy periods of negotiations stock trading is forbidden as well. In one such "quiet or blackout period" the first one immediately following the date I exercised the ESO's that created this mess, the stock value fell by 50% in a period of 6 months during which it would have been illegal for me to sell any stock.
Fundamentally this is all wrong and in short, my opportunity to sell stock, under the "he choose to accept the market risk argument" was more than 75% less than someone who was not an insider. As a result my opportunity to play the market, should I have chosen to do so, was dramatically crippled and therefore it is clearly unfair for the same tax principles to be applied to the two very different circumstances. As of March 2007 however the deferral situation I have been in for the past 6 years has ended and my situation has gone from a pregnant and inevitable yet deferred liability to an actual realized debt. Through no fault or action of my doing the deferral has ended and I now owe tax on a fictitious “deemed disposition” equal to $1,225,350 … or roughly a $280,000 tax bill. This has occurred as a result of the public company in which the stock was held “went private”. In doing so they forced me to sell them all the stock that I had in the company and created a real disposition. They have paid me a total of $54,050 for the affected shares. Obviously I did not wish or intend for this to happen and had no control over it coming to fruition. In short I did not end the deferral - they did - against my wishes. So what I am looking for now is some guidance and advice and support.
I need to find away to regain the deferral or find some reasonable exit from this extremely unfair, unnecessary, trying and stressful saga. I have always been an extremely proud Canadian as I have seen it as a fair-minded country managed by reasonable people whose agendas are driven by common sense and doing what is right. I have been losing faith over the past 6 years in the institutions that affect me in this regards, given their refusal to accept the ESO situation in general as being ill founded and fundamentally unfair. My case has now gone from that to a very real and pressing tax liability problem. Clearly there are various schools of thought, differing opinions, many issues in play and nuances of great variety on the subject but, I can tell you one thing for sure.
Any fair minded person who the situation is explained to universally says “that is ridiculous – how can they expect you to pay tax or something you never had ?”. At the end of the day, regardless of how I arrived at this point of concern, I will be faced with first paying tax on the $54,050 in proceeds from the forced sale and then paying the Aprox $280,000 in taxes on the phantom profits I never made. That is simply not right or fair. It is ill conceived, ludicrous in it's logic, onerous in it's application and a change must be made. I urgently need some relief assistance now that the deferral period of reprieve from these taxes on phantom profits has been triggered. There are at least 10,000 people in Canada with an ESO Tax deferral ... ticking away waiting to explode, providing unjustified windfall tax profits to the government. In the interest of doing what is right and fair and just how can this be ignored ? Your support, guidance and assistance would be much appreciated. I need to know what avenues are open to me and what steps I need to take before I am forced into a very real financial disaster. Could you please take some time to consider my new situation and let me know your thoughts and what next steps I should take.
Sincerely,
(Name witheld for present)
Similar letters have been sent to sitting members of parliament without visible results so far.
Is this the kind of Government you want?
Victor
email:- vic.drummond@sympatico.ca
Partners in Crime.
There is a long standing adage:- "Crime Doesn't Pay." Revenue Canada apparently doesn't subscribe to that concept according to their:- "Interpretive Bulletin Number IT-256R" which addresses:-
"1."...the treatment of those amounts in the hands of the recipient, and also covers cash or property received as a result of extortion, blackmail, bribery or other similar acts."
"2. These funds or property are income from a source and as such are taxable in the hands of the recipient. The cash or fair market value of property received will be added to the recipient's income in the year of receipt."
"3. Taxpayers who receive such funds, or property, may be subject to a penalty under subsection163 (2) for each year that they were taken and not reported."
"4. It is the Department's practice that when amounts that were added to a taxpayer's income under 2. above are repaid, there will normally be a deduction allowed in respect of such repaid amounts for the taxation year in which the repayments are made unless the taxpayer was a major shareholder or senior official of the injured party at the time of the theft or other act to which the comments herein apply."
So let me get this straight -- If I do any of the above actions to take money or property illegally that makes me a criminal -- Right?
Now if I share my ill gotten gains with Revenue Canada that makes them an entity now in possession of stolen property -- Right?
If you or I are caught in possession of stolen property we go to prison - Right?
No wonder Revenue Canada see's nothing wrong with stealing cash themselves -- in the form of taking huge sums of money from employee's who participated in employer's shares options plans and were taxed on profits that never existed.
Way to go -- RC.
I wonder if they give a tax refund to criminals (oops taxpayers) that have declared their stolen gains -- paid the tax -- then get caught -- after the money is all gone -- and go to jail?
Victor Drummond
"1."...the treatment of those amounts in the hands of the recipient, and also covers cash or property received as a result of extortion, blackmail, bribery or other similar acts."
"2. These funds or property are income from a source and as such are taxable in the hands of the recipient. The cash or fair market value of property received will be added to the recipient's income in the year of receipt."
"3. Taxpayers who receive such funds, or property, may be subject to a penalty under subsection163 (2) for each year that they were taken and not reported."
"4. It is the Department's practice that when amounts that were added to a taxpayer's income under 2. above are repaid, there will normally be a deduction allowed in respect of such repaid amounts for the taxation year in which the repayments are made unless the taxpayer was a major shareholder or senior official of the injured party at the time of the theft or other act to which the comments herein apply."
So let me get this straight -- If I do any of the above actions to take money or property illegally that makes me a criminal -- Right?
Now if I share my ill gotten gains with Revenue Canada that makes them an entity now in possession of stolen property -- Right?
If you or I are caught in possession of stolen property we go to prison - Right?
No wonder Revenue Canada see's nothing wrong with stealing cash themselves -- in the form of taking huge sums of money from employee's who participated in employer's shares options plans and were taxed on profits that never existed.
Way to go -- RC.
I wonder if they give a tax refund to criminals (oops taxpayers) that have declared their stolen gains -- paid the tax -- then get caught -- after the money is all gone -- and go to jail?
Victor Drummond
Friday, May 11, 2007
Rob Me Once
Rob Me Once -- Shame on You. Rob Me twice Shame on Me.
In the time period from 1996 to 2003 -- I have been told by a significant number of people that they have been heavily taxed on "Employment Income" that never happened -- and that thousands of other Canadians suffered the same fate.
These tax victims were people who participated in shares options plans promoted by their employers. The same shares, obtained in any other way, are only taxable on GAINS actually realized by the holder and then only if there is a real, tangible, spendable, profit realized.
Furthermore if a conventional share holder has some good years -- and pays "Capital Gains Taxes" -- followed by a year or so of real Losses -- then the shareholder can either apply the losses against previous years gains, (up to three years prior), and/or carry the losses forward indefinitely to be applied against future gains. When such Capital Losses are applied to past or future gains the shareholder realizes a reduction in the taxes paid, or payable, and that system works rather well.
No one asks the conventional shareholder how they came into possession of the shares they have or sell.
If, however, an employee participates in an employers shares reward, incentive plan the Canadian tax system becomes a booby trap. The shares obtained in this manner are now classed as a "Taxable Benefit" and the Canadian Department of Revenue obliges the employer to calculate any potential gain the employee might realize, at the time of purchase, and again at the time of delivery, and add this calculated -- as yet unrealized gain -- onto the employees actual "Employment Income" and taxes are then calculated on that phantom income total.
While some employees may have come away with real gains, many were taxed on gains that never materialized. Even those who made real profits were robbed because they are denied the priviledge of applying past, or future, shares losses to recover taxes paid on their temporary gain.
Those that never realized a gain of any kind were taxed on those imaginary gains for several years in the time period mentioned above. In many cases the tax alone was greater than the persons total real Employment Income and several victims, I know personally, had to borrow money, or mortgage their homes to pay those unfair taxes.
To compound the felony the current government recently made a deal with the employee's of the JDS Uniphase Corportion, in British Columbia to alleviate their deferred taxes on these so-called "Taxable Benefits".
To the present this tax relief is only for the JDS victims in BC and others in a similar situation are not included. Not even other victims in BC.
This article is an invitation to all other such victims to speak up and let the goverment know they will not support such discrimination in either the tax system and/or the preferential treatment of victimized Canadians.
Rob Me Twice -- Shame on Me.
Victor Drummond
vic.drummond@sympatico.ca
In the time period from 1996 to 2003 -- I have been told by a significant number of people that they have been heavily taxed on "Employment Income" that never happened -- and that thousands of other Canadians suffered the same fate.
These tax victims were people who participated in shares options plans promoted by their employers. The same shares, obtained in any other way, are only taxable on GAINS actually realized by the holder and then only if there is a real, tangible, spendable, profit realized.
Furthermore if a conventional share holder has some good years -- and pays "Capital Gains Taxes" -- followed by a year or so of real Losses -- then the shareholder can either apply the losses against previous years gains, (up to three years prior), and/or carry the losses forward indefinitely to be applied against future gains. When such Capital Losses are applied to past or future gains the shareholder realizes a reduction in the taxes paid, or payable, and that system works rather well.
No one asks the conventional shareholder how they came into possession of the shares they have or sell.
If, however, an employee participates in an employers shares reward, incentive plan the Canadian tax system becomes a booby trap. The shares obtained in this manner are now classed as a "Taxable Benefit" and the Canadian Department of Revenue obliges the employer to calculate any potential gain the employee might realize, at the time of purchase, and again at the time of delivery, and add this calculated -- as yet unrealized gain -- onto the employees actual "Employment Income" and taxes are then calculated on that phantom income total.
While some employees may have come away with real gains, many were taxed on gains that never materialized. Even those who made real profits were robbed because they are denied the priviledge of applying past, or future, shares losses to recover taxes paid on their temporary gain.
Those that never realized a gain of any kind were taxed on those imaginary gains for several years in the time period mentioned above. In many cases the tax alone was greater than the persons total real Employment Income and several victims, I know personally, had to borrow money, or mortgage their homes to pay those unfair taxes.
To compound the felony the current government recently made a deal with the employee's of the JDS Uniphase Corportion, in British Columbia to alleviate their deferred taxes on these so-called "Taxable Benefits".
To the present this tax relief is only for the JDS victims in BC and others in a similar situation are not included. Not even other victims in BC.
This article is an invitation to all other such victims to speak up and let the goverment know they will not support such discrimination in either the tax system and/or the preferential treatment of victimized Canadians.
Rob Me Twice -- Shame on Me.
Victor Drummond
vic.drummond@sympatico.ca
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