I am an early employee at a startup, and I took a large equity stake in-lieu of salary.
I expect that Canada Revenue Agency taxes this as income when the shares are sold. So in the year the company is sold for a $Bn ;-) I will owe 40% income tax on the value of these shares when they were granted and capital gains on the profit — less a whole bunch of startup-friendly capital gains exemptions.
My concern is what if the company doesn't make it but is still sold? Imagine if instead of bankruptcy it is sold for $1, e.g. for the value of the IP minus debts.
When the shares vested, they were nominally worth $1M (at the rate we were then raising money) — would I still have a tax bill on this value i.e. $400K — but no actual money?
Canada Revenue Agency's phone help line seems only to deal with filing actual returns, not 'what if' questions.
I know the answer is always ask a lawyer / accountant / ninja, but I wondered if anyone had any suggestions where to look for answers?