IF I DO IT -- IT IS THEFT..

IF I DO IT; IT IS THEFT – WHEN WE DO IT; IT IS LEGAL
A commentary on the Canadian Government taxing
honest, hard-working Canadians on phantom income.

by Victor Drummond ©
September 2009

On at least two occasions, in the past month, a paper was deposited in my home mail box courtesy of the Honourable Inky Mark C.P. M.P. for the riding of Dauphine, Swan River, Marquette, Manitoba.

The paper carried no “To” Address and no stamp. So I conclude it was hand delivered to my mail box by a local volunteer working for the Federal Conservative Party of Canada, Economic Action Plan Committee.

The return address is postage free compliments of the franking privilege granted to mail addressed to M.P.s using a House of Commons address. This strikes me as an abuse of the franking rights given all M.P.s as it is our tax money that is paying for this political party promotion which is nothing more or less than a pre-election campaign for votes.

Both papers featured a Conservative Government initiative intended to influence the reader to check off a political party leaders name as being the one -- on the right track -- to restore economic stability to Canada, and in this case protect Canadians from being ripped-off by unscrupulous criminals.

Of course right alongside the row of political leaders names is the smiling picture of non-other than the Right Honourable Stephen Harper, Prime minister of Canada.

The reader is invited to check off the name of the party leader who is their choice as the leader who is on the right track. Political leaders named are: Michael Ignatieff (Liberal), Stephen Harper (Conservative), Jack Layton (NDP) and Elizabeth May (Green Party)

Along the lower edge of the page is the Conservative Party Slogan: “STAND UP FOR CANADA”.

The political pitch of this latest page is: the protection of Canadian families against loss of their life’s saving through “Identity Theft”.

Following is the text of the pitch:

“Canadian families work hard and play by the rules. If a thief uses your identity to steal your hard-earned savings, the financial effects could be devastating."

"Prime Minister Stephen Harper and the Conservative government are helping Canadians keep their identities safer by strengthening the laws against identity theft."

'We are introducing legislation to catch criminals before the crimes take place.
We are making the possession of personal identity a crime punishable by a five year sentence behind bars."

"We are also cracking down on those who traffic in personal information and government issued ID’s."

"The Conservative government is taking the right action to keep Canadians safer from all criminals."

So long as the government persists in taxing, honest, hard-working Canadians on fictional “Earned Income” this amounts to nothing more or less than the pot calling the kettle black.

What difference is there if your life’s savings are stolen by an identity thief or if they are taxed away on the basis of “earned Income” that was neither “earned” nor “income”? What real difference is there? Your life’s savings are gone in either case and in both cases on a pretext basis.

Actually you may be better off by having an identity thief clean out your bank account as you can now buy insurance against this kind of robbery but you have absolutely no protection against the Canadian government.

When our government taxes you into a state of poverty the only recourse you have is to apply for tax relief as a “hardship case” and hope for a favourable decision by the Canada Revenue Agency Chief of Appeals Officer.
A crap shoot at the best of times. And the recently created "Taxpayers Ombudsman" has no authority to enforce your rights.

What is the government’s purpose in passing legislation to protect Canadian families -- that work hard and play by the rules -- from thieves and then financially devastate thousands of those same families with horrendous taxes levied on fictional income?

If our government is really interested in passing legislation to protect the financial resources of honest, hard-working Canadians, and their families, then they should begin by cleaning up their own back-yard.

They must introduce legislation to place company shares, traded on a conventional stock exchange in the classification where they belong: i.e. as a capital equity, not temporarily in the classification of a taxable benefit where they can be “deemed” (ASSUMED) to be one thing at one time, (earned income), and something else the next time, (a stand alone capital loss).

Although our Honourable Jim Flaherty, Minister of Finance persists in declaring the Canadian Income Tax Laws relating to Incentive Share Option (ISO’s) are “fair” the United States Government and most Canadians disagree.

The U.S. government finally admitted, in October 2008, that taxing ISO holders on phantom income was not fair and not justified under any circumstances.

Consequently the U.S. government have amended their defective Alternative Minimum Tax (AMT) Legislation thereby revoking all taxes and related penalties levied on phantom income. They made the correction retroactive and are currently in process of compensating their taxpayers who have already been victimized by the flawed tax legislation and application policy.

Canada’s defective taxable benefit legislation, as applied to our equivalent ISO participants, is no different in it’s quota of injustice and unfairness than the U.S.A. AMT taxation policy. But so far Canada’s government will not acknowledge their phantom tax policy is unfair and have ignored all victims’ appeals to correct the problem.

Journalist Don Cayo, stated the situation perfectly in his article: “Change the law don’t just mask the problem” which appeared in the Vancouver Sun, Newspaper, on January 18, 2008. This one sentence tells it the way it should be:

“The answer is to change the law. To tax only actual profits that stockholders make, not some fictional amount tied to an arbitrary date.”

So which Canadian federal political leader is “STANDING UP FOR CANADIANS” on the issue of protecting hard-working Canadians who play by the rules – safeguarding their life’s savings from vanishing like the morning mist?

“None of the above”. That is who. And it is all perfectly legal.

It is time for Canadian voters to remind our elected government who they work for and who is paying their better than average salaries, perks, and pensions.

See you at the voting polls of the next federal election O’Grady

Victor Drummond ©

LOST IN...

LOST IN TRANSLATION
A commentary on Canadian Government Laws
that allow the Canada Revenue Agency to Issue
their own IT’s -- Interpretive Documents and
then apply, or ignore, them with impunity.

By Victor Drummond ©
September 2009

A few years back I attended a means and ways conference on making Canada a truly bi-lingual country.

A land where French and English would have equal status.

One of the Anglophones at that conference told a joke to illustrate that some things just do not translate with equal effect.

He told the story about three Englishmen, who were all hard of hearing, and had started an automobile journey together from London to another town called Wembley.

The Story:

"After a hot dusty hour of driving they were approaching an urban area when one of the travellers asked: “Is this Wembley?"
One of his companions replied: “No this is Thursday”. To which the third traveller added: “Yes, me too - let’s stop for a drink.”

Due to the phonetic similarity of the words Wembley, Wednesday, Thirsty and Thursday in the English language the story is funny. The same story translated into another language loses its humorous aspect and might not make any sense what-so-ever.

A person would not expect to encounter difficulty in relating this joke in the English language but supposing the laws of joke telling were written in legalize language with an Interpretation Bulletin, IT-000R0, containing wording such as: “under circumstances where a joke includes calendar references such as the names of months, or groups of months, or the names of days, or groups of days and/or a geographical location such as a village, town or city the person telling the joke may substitute astrological titles that apply to the groups of months, or groups of days and may use longitude and/or latitude values that equate to the geographical location(s).

Furthermore jokes that refer to personal attributes such as racial origin, personal health situations, height or weight, where a description of these characteristics might be considered detrimental to the person(s) described these details are not to be included in the joke.

So now the joke is reduced to: “Three Englishmen were travelling together on a hot dusty day from 51n43 :0w18 to 51n33:0w18.
After a dusty hot hour of driving they were approaching an urban area and one of the travelers asked: "Is this place 51n33:0w18"?

One of his companions replied: “No this the first day in the astrological sign of Virgo.” To which the third traveller replied: “I wish you two would stop talking about sex.”

While the story -- related in conformance with the laws applying to the telling of jokes, using legalize language, in keeping with Interpretation Bulletin IT-000R0 -- may strike some people as hilarious the humorous aspect of the original joke has been totally lost in the legalized language translation.

The point of the foregoing is to illustrate that when a piece of legislation is written in legalize language with numerous optional meanings being left to the whim of the applicable government/judicial agency -- then the original intent and purpose of the legislation may be totally lost and the law enforcement agency left to apply their own Interpretation of the law as they see fit.

This situation allows the enforcement agency to apply whatever definition they want to the original legislation and may issue vague and contradictory Interpretation bulletins in support of their chosen definition(s) – thereby in effect creating a law of their own. A law that may contain features never intended by the authors of the original legislation.

For example a review of the Canada Revenue Agency, (CRA), Interpretation Bulletins will reveal the statement: “Interpretation Bulletins are for guidelines only and do not carry the force of law.” Or words to that effect.

Furthermore although the CRA writes and publishes many of these IT Bulletins they are not bound to observe them.

So when a CRA ruling is applied to a taxpayer and an IT Bulletin is quoted as the legal basis for this ruling the IT Bulletin quoted may be nothing more than a tool used to intimidate the taxpayer into accepting the translation the CRA has chosen to apply in that instance.

A classic example of this phenomenon is the CRA Document T4130(E) Rev. 08 titled “Employers Guide to Taxable Benefits”.

This document is intended to clarify the section of the Canadian Income Tax Act dealing with perks supplied by employers to their employees and when such a perk is taxable and/or subject to Employment Insurance deduction etc.

On page 14 of this document the following guideline appears:

Gifts and awards

A gift or award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash.

A near-cash item is one that can be easily converted to cash such as a gift certificate, gift card, gold nuggets, securities, or stocks.

Cash and near-cash gifts or awards are always a taxable benefit to the employee. Non-cash gifts or non-cash awards, on the other hand, may not be considered a taxable benefit under certain circumstances.

Then on document page No. 23 we find the following guidelines:

Security options

When a corporation agrees to sell or issue its shares to an employee, or when a mutual fund trust grants options to an employee to acquire trust units, the employee may receive a taxable benefit. The taxable benefit is the difference
between the fair market value of the shares or units when the employee acquired them and the amount paid, or to be
paid, for them, including any amount paid for the rights to acquire the shares or units. In addition, a benefit can accrue to the employee if his or her rights under the agreement become vested in another person, or if they transfer or sell the rights.

All that is necessary, according to the above interpretation of the Canadian Income Tax Act, for the CRA to declare that shares an employer agrees to sell or issue to an employee are a taxable benefit is to say that stock (shares) are: a near-cash item.

Declaring stocks (shares) to be a “near-cash” item -- when that item has no guaranteed value, and has no face value, and can only be sold, if and when, there are investors willing to bid something for them, and can not be taken to just any financial organization and exchanged for cash -- is a bit of a stretch of credibility.

When employees were initially enticed into participating in their employer’s shares purchase plans such as ESPP’s and/or ESO’s what were the employee’s told by their employer’s and by the Canadian Government, regarding the intent and purpose of these plans?

According to the CRA Interpretation Bulletin No. IT-113R4 (opening paragraph) here is the Canadian government’s description of these plans:-

Canada Customs and Revenue Agency INTERPRETATION BULLETIN NUMBER: IT-113R4

DATE: August 7, 1996

SUBJECT: INCOME TAX ACT Benefits to Employees - Stock Options

Summary

"This bulletin discusses the rules in the Act relating to the taxation of employment-related stock options (stock options). Stock options, as discussed in this bulletin, refer to certain rights that a corporation may grant to its employees or to the employees of a non-arm's length corporation that allows the employee to acquire shares of either of those corporations.
The rules in the Act relating to stock options are intended to encourage greater employee involvement in the granting corporation and to allow corporations to offer their employees financial incentives in lieu of higher salaries."

Then what did the employer’s tell their employees is the intent of the plans they were offering?

An example of the declared purpose of these plans is well demonstrated in the following excerpt from the JDS Fitel Corporation brochure distributed to their employees in March 1996.

1. Purpose of the Plan

The purpose of the Stock Option Plan is to develop the interest and incentive of eligible employees and directors of JDS FITEL Inc. and its subsidiaries (the “Company”) in the Company’s growth and development by giving eligible employees and directors an opportunity to purchase common shares on a favourable basis, thereby advancing the interests of the Company, enhancing the value of the Common shares for the benefit of all shareholders and increasing the ability of the Company to attract and retain skilled and motivated individuals in the service of the Company.

Also the government IT-113R4 plainly states:- The rules in the Act relating to stock options are intended to: "encourage greater employee involvement in the granting corporation and to allow corporations to offer their employees financial incentives in lieu of higher salaries."

Then by what form of translation do shares acquired under these plans become a form of a taxable benefit?

According to the CRA’s own IT-113R4 employees who participated in these plans may have worked harder and took lesser salaries. Plus these shares were not: “Gifts” or “Awards” the employees were obliged to pay for shares they purchased with their own after tax dollars.

There is no justification what-so-ever for the Canadian government to add insult to injury by taxing honest, hard working Canadians on any unrealized potential gain they might have had – but never received -- and then blocking all real losses the taxpayers suffer that were caused by the very same shares which they still hold.

Here is a review of the things “Lost in Translation” when the CRA decided to deem (ASSUME) shares sold, Not Given or Awarded, to their employees, are a taxable benefit at the time of delivery (if trading at a price greater than the Accumulated Cost Base (ACB) of those shares) but a “Capital” equity thereafter.

(1) Every Canadian has lost the RIGHT to equal treatment under the laws of Canada.

(2) Individual victims have lost their savings and/or other personal property sometimes to the point of becoming a hardship case.

(3)Victims who have utilized the Tax Deferral option, of CRA Form T1212, have lost peace of mind and are under constant threat their tax deferral may be terminated under circumstances over which they have no control.

(4) Victims who are living under the terms of a T1212 Tax deferral have lost the right to leave Canada to live in another country until the tax is paid.

(5) Victims who are living with a T1212 tax deferral have lost the right to sell or trade their remaining ESPP/ESO Shares until the tax is paid, or payable.

(6) Many victims have appealed to their elected federal Members in Canada’s Parliament and have mostly been denied representation.

All the above items are lost to Canadian citizens due to the CRA Translation of stocks (shares) being a “near-cash” item and shares acquired by way of an employer’s ESPP/ESO agreement are a stand-alone taxable item immune to any losses those same shares may generate.

And those: “Losses in Translation” are no Joke – or even a joking matter.

Appeals by victims, of this tax fiasco, have been and are still being ignored by Canada’s House of Commons members who have ostensibly been elected to represent the best interest of all Canadians.

If our elected representatives are not up to the job of defending their constituents from bullying and abuse, by our own government, then it is time for the voters to remind those who wish to take their pay and benefits out of our tax dollars – just who they really work for.

See you at the voting polls in the next federal election O’Grady.

Victor Drummond ©

ITS MY BALL - ITS MY BAT -

ITS MY BALL – ITS MY BAT - AND ITS MY GLOVE
A commentary on the Canadian Government’s attitude towards
correcting the unjust, unfair and outrageous tax on phantom income.

by Victor Drummond ©
September 2009

Even before the group called “Canadians for Fair and equalized Taxation” (CFET) appeared on the Canadian Political scene (February 21 2008) many honest, hard-working Canadians, caught in the taxable benefits booby-trap, had appealed to all levels of the Canadian Government for “fair taxation”.

Canada’s Liberal government, all the way from The Right Honourable Paul Martin, Prime Minister of Canada, down to the lowest level back bencher, treated these victimized taxpayers as cash-cows and fiddled around with appellant’s communications by passing their appeals back and forth between themselves without anyone raising a finger to correct the problem. When a victim did receive a bottom line reply, from a responsible Minister, the message equated to: “you have been taxed according to existing Canadian Laws so pay up and shut up.”

The issue became even more unfair, when the conservative government was elected to form Canada’s government in 2006 and then proceeded to acknowledge taxing of phantom income was unjustified, and unfair, by creating a Tax Remission Order (TRO) cancelling all taxes on phantom income and related penalties for 37 former employees of the defunct SDL Optics Inc./JDS Uniphase Corp. plant in Saanich British Columbia.

A remark attributed to the riding MP, The Honourable Gary Lunn, at that time implied that a change of government had brought about this fair tax TRO and the Prime Minister had listened to the victims appeals and acted to correct the problem.

Even The Right Honourable Stephen Harper was quoted as saying: “we’ll get it resolved” when asked what would be done, by his government, to correct the problem for all victimized Canadians.

Perhaps the Conservative government considered the problem resolved when they announced the creation of the updated “Taxpayers Bill of Rights” along with the newly created government office of a “Taxpayers Ombudsman” in May 2007.

No doubt the public assumed the Taxpayer’s Ombudsman had the power to enforce those upgraded Taxpayers Bill of Rights.

And no doubt the fact that both events were announced at the same time, by the same high level Conservative Ministers, The Hon Carol Skelton, Minister of National Revenue, and the Hon Jim Flaherty, Minister of Finance, that is exactly what the Canadian public were intended to believe. BUT It’s not so.

Unfortunately both items were nothing more than a big farce. The Taxpayers Ombudsman has no mandate to enforce anything.

His office budget is a sub-component of the Department of Finance operating budget making him a puppet of the Department of Finance.

Appeals submitted to the office of the Taxpayers Ombudsman are filed as “Complaints” and forwarded to the Canada Revenue Agency for processing.

So victims of the tax on “money never seen” are still sitting at square 1.

When CFET came into existence appeals for “fair taxation” have become more documented, more co-ordinated and better organized. Members of CFET have been granted hearings with members of the House of Parliament Standing Committee on Finance (FINA).

FINA recently passed a motion, by a vote of 7 to 0, to have the phantom tax issue reviewed and they requested impact information from the Department of Finance with a reply by mid September 2009.

A reply was received from the Department of Finance, before the target date, but the information requested was not provided and the tone of the reply came across to me as saying: “It’s my ball, it’s my bat and it’s my glove” so play according to my rules or get lost.”

One thing our elected politicians should keep in mind is:
Right – while you are part of the government in office: “it is your ball, it is your bat and it is your glove BUT it is our field your playing in and if you do not want to spend your next election term in the showers – Play Fair.”

Canadian voters need to make their voice heard on the phantom tax issue.

Everyone, excepting those with a vested interest in the status quo, who have taken the time to check the facts, for themselves, has reached the inevitable conclusion taxing honest, hard-working Canadians on money that only existed in theory is unjust, unfair and un-Canadian. Paying this tax, with after tax dollars, is double taxation making the situation doubley unfair.

While there is still time to get through to your elected representative, and/or those who campaign to become your elected representative, please inform them that you demand Canada’s defective taxable benefit legislation be corrected and those who have already paid taxes on income, that never came in, be fairly compensated.

The U.S. government has already acknowledged this tax is unjust, and have corrected their phantom income tax legislation and also retroactively fairly compensated those victimized by it. Canada has no excuse for continuing to abuse Canadian taxpayers by way of this insidious tax policy.

See you at the voting polls of the next federal election O’Grady.

Victor Drummond ©

THE SAME OLD - THE SAME OLD..

SAME OLD, SAME OLD ELECTION BS
A commentary on the pre-election shenanigans
Canada’s Federal Political Parties are starting
to foist upon the Canadian voters.

by Victor Drummond ©
September 2009


Although the Loyal Opposition Parties have not yet announced a viable strategy for ending the present Conservative Government term in power the sabre rattling has increased and the leader of the Federal Liberal Party of Canada has been issuing noises like a king in the making.

Jack Layton on the other hand has been making noises more like a quisling. He might make a deal with the Conservatives if they will dance to his tune but the Right Honourable Stephen Harper hasn’t risen to the bait – so far.

Elizabeth May hasn’t said much about supporting anyone, in a vote of no confidence, and in keeping with good political strategy hasn’t committed to anything other than keep the environment clean and green.

Gilles Duceppe has only stated, so far, that he will support any political manoeuvre that he believes will be good for Quebec.

Not one federal political party leader has brought forward an issue that even comes close to justifying defeating the present government and taking the nation into another federal election.

Although every one of them has been requested, by victims of Canada’s tax on phantom income, and many times by the non-profit social group, “Canadians for Fair and Equitable Taxation” (CFET) -- to address the issue of Canada’s defective taxable benefit legislation, and the outrageous policy of taxing honest, hard-working, Canadians on pretend (phantom) income -- not one of them has done so to date.

Why are our champions of Canadian justice, and fair play, shying away from taking a stand, either for or against, the policy of taxing Canadians on phantom income?

Can they not make a decision on such a simple issue?

If any one of them actually believes taxing Canadians on money never seen, is fair and justified, why not just say so.

Or, on the other hand, if any one of them knows in their heart taxing people on pretend income is outrageously unfair why not just say so – and then commit to correcting the problem.

By keeping silent on this issue they all reveal they lack at least one essential quality i.e. one quality absolutely required in order to serve and protect the best interests of all Canadians.

Even after the United States of America (USA) government passed bills to correct their defective Alternative Minimum Tax (AMT) income tax legislation to put an end to taxing phantom income of American taxpayers our federal political leaders do not have what it takes to take a stand on this issue.

In addition to ending the unfair phantom income tax the USA government included a method of fairly compensating those who had been previously victimized by it.

In spite of indisputable evidence the USA government acknowledges taxing citizens ,on money never seen, i.e. phantom income, our political leaders avoid the issue like it was a plague.
What are they afraid of?

The Hon. Jim Flaherty, Minister of Finance, who has a vested interest in keeping the phantom income tax in place, is now the only member of Canada’s House of Commons, (HOC), who even attempts to try and convince Canadians the on-going taxation of pretend income is fair. And even his arguments, in defence of this tax fiasco, fall flat upon close examination.

So if those who would take Canadians into another federal election, are not able, and/or not willing to even admit this issue exists why should anyone bother to vote for them?

What other controversial issues would they hide from if they were elected to the office of Prime Minister of Canada?

How many other Canadians would they figuratively throw under the bus if it became politically expedient to do so?

God only knows.

But one thing I do know for certain – If not one contender for the office of Prime Minister of Canada comes forward to address this issue – then I won’t waste my time to vote in any future federal election.

And neither should you. There wouldn’t be anything to gain by voting for wimps.

Victor Drummond ©

NOT A NEAR CASH..

WHY ARE CONVENTIONAL CORPORATED SHARES
NOT A NEAR CASH ITEM

A commentary on the flaws in the Canadian Income Tax Act
that are used by the Canada Revenue Agency to tax honest,
Hard-working Canadians on phantom income.

By Victor Drummond ©
September 2009

Every year, since the Hi-Tech stock market boom went bust in July of the year 2000, hundreds of honest, hard working Canadians have been levied horrendous, financially devastating taxes on phantom “income”.

The total of such Canadian victims has been growing every year since and is still on-going despite the fact the United States government has corrected their defective income tax legislation and put an end to this unfair, unjust and abusive tax policy.

Without performing any analysis, of the problem, it is apparent to everyone, except our elected government members, there can be no possible justification for taxing people on money that never existed and forcing them to deplete their savings accounts, (after tax dollars), and even go to the extent of selling, or at least mortgaging/remortgaging the family home to pay any tax what-so-ever.

Although the defects in our “taxable benefits” legislation did not cause any problem during the Hi-Tech boom years BUT when the Hi-Tech market boom went bust, in the year 2000, then the taxable benefit legislation flaws became painfully obvious.

Many honest, hard-working Canadians -- employed by Hi-Tech communications corporations, such as Nortel Networks and JDS Uniphase Corp, who were participants in their employer’s Incentive Shares Options plans (ISO’s) i.e. in Canada, Employee Shares Purchase Plans (ESPP’s) and/or Employee Shares Option (ESO) agreements, and who had failed to sell their related shares on the day they took possession of them – were shocked to discover, when the year 2000 T4 slips were issued, that they had been declared to have “Earned Income” many times greater than their actual gross annual salary.

In many such cases the taxes alone levied on this inflated “Earned Income” exceeded the employee’s actual gross income, for the entire year, by as much as 1000%.

Victims of this outrageous tax began making appeals, for fair tax assessment. They sent letters of appeal to the CRA and to their Member of Parliament and to all levels of the Canadian Government from the Prime Minister to the farthest back, back-bencher and everyone in between.

All to no avail.

The only recourse made available to these victim’s, of Canada’s defective taxable benefit legislation, was to apply for deferment of the taxes levied by implimenting the features of the government form T1212.

Otherwise they could request their taxes be cancelled, or reduced, on the basis of being deemed a “hardship case”.

Appeals to the Chief of Appeals officers, in the various CRA Offices across Canada, were a crap shoot at best and the prospects of obtaining a favourable decision from these officials depended as much, or more, upon the location where the appeal was submitted, as it did upon the merits of the victims case.
(According to a recent Federal Auditors Report)

Upon inspection of the defective taxable benefits legislation and application policy it turns out this whole tax debacle could have been easily avoided, in the firat place, and can now been easily corrected by recognizing that the basis for this so-called taxable benefit is not a taxable benefit item in the first place.

The CRA policy of taxing recipients of their employer’s corporate shares is founded upon those shares being classified as “near cash” items. In the CRA Document T4130 “Employer’s Guide to Taxable Benefits” it states:

Gifts and awards
A gift or award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash.

A near-cash item is one that can be easily converted to cash such as a gift certificate, gift card, gold nuggets, securities, or stocks.

Cash and near-cash gifts or awards are always a taxable benefit to the employee.

Non-cash gifts or non-cash awards, on the other hand, may not be considered a taxable benefit under certain circumstances.

Security options

When a corporation agrees to sell or issue its shares to an employee, or when a mutual fund trust grants options to an employee to acquire trust units, the employee may receive a taxable benefit.

The author(s) and interpreters of the above definition of the “taxable benefits” legislation have considered unsecured corporate shares to be a near-cash item. They are not a near cash item.

To be a near cash item an equity/document must have a face value, such as a bond, or a Guaranteed Investment Certificate (GIC) which has a guaranteed cash value upon maturity and possibly at all times prior.

Shares issued by a corporation do not have a secured or stated face value.

Neither the government,nor any other institution will guarantee you can exchange a conventional corporate share for any amount of cash. Try selling your Nortel Networks shares if you doubt this claim.

The cash value of conventional shares, traded on a conventional stock exchange, are only worth what the bidder(s) are willing to pay. No bidders = no cash value.

Secondly the shares reported to the CRA as “Earned Income” were purchased by the employee with their own money.

They were neither a gift nor an award. They were an incentive device intended to share the corporations growth, in value, with the people who produced that growth and to provide a tie between the employer and the valued employees during the Hi-Tech boom years when head-hunters were widely used to entice valued employees to change employers.

Whether or not you are a direct victim of this insidious tax fiasco -- or do not even know of anyone who is -- you will be doing yourself, and all Canadians, a huge favour if you will contact your riding Member of Parliament and inform them you demand the practice of taxing phantom income in Canada be stopped NOW, as has been done in the United States. Ref: www.reformamt.org and www.cfet.ca and all those already victimized be fairly compensated.

See you at the next federal election voting polls O’Grady

Victor Drummond ©