Investment firm Thoma Bravo is buying my former employer, Entrust Inc. You’d think that since I haven’t worked there for nearly 8 years, I wouldn’t have strong feeling about this takeover. Unfortunately, due to bizarre tax laws this is going to cost me a 6-figure tax bill for 2009! You see, back in the heady days of the late 90s, most people working in high tech got stock options. These options give the holder the right to buy shares at a fixed price. When the stock goes up, the holder of the options gets to buy the shares at the lower price and make money on the difference. Unfortunately for me (and many others), I bought shares, but hung on to the stock. So, I got shares at a cheap price when they were trading ridiculously high, but then sat on my hands and watched the share price make a long, sad descent. Now, I’m being forced to sell my shares to Thoma Bravo for a price lower than I paid for them. But, that’s the way it goes with stock ownership. I bought the shares fo...

Imagine working for a company for years, participating in the company savings plan, taking $2000 out of the plan, and then getting hit with a tax bill for $50,000! This actually happened to a woman who worked for $14 per hour for JDS Uniphase. Sadly for her and her husband, she wasn’t one of the JDS Uniphase employees who had their tax bills forgiven late last year. There is an organization growing to fight to change Canadian tax law to stop the taxing of money that people never received. This organization is called Canadians for Fair and Equitable Taxation (CFET). I explained the problem first here and here . It’s hard to understand why the government would want to tax people on money they never actually received. The problem is related to how employee stock options are taxed. The gain in the value of the options can’t be offset against any losses on the stock acquired with the options even though both are taxed at the same rate. Many company savings plans are structured ...

In my last post , I explained what is going on with the tax amnesty granted to former JDS Uniphase employees who ran afoul of the rules for taxing stock options. I continue to read articles that are sharply critical of the government, but don’t accurately portray what happened. The main point that people I speak to about this situation don’t believe even when I explain it is that taxes are being charged on income never received. It is possible for employees with stock option plans to put $10,000 into their plans, later take $10,000 out of their plans, and then be expected to declare $500,000 in income on their taxes. See here for a full explanation. I disagree with those who say that these are high-tech high rollers who deserve what they got. I worked with people who were caught by these tax rules for smaller amounts. My colleagues were not high rollers or even particularly savvy with their money. Like most people they did their best to understand the benefits offered by the...