# Google stock "split" Canadian tax implications



## orangem (Feb 1, 2014)

Google will have their stock "split" on March 27. A traditional stock split has no tax implications but Google is issuing a dividend Class C share for each Google class A one holds. Price wise it is a stock split, but how would Canadian tax law treat such a stock split? *Would the class C shares I received be classified as a dividend income? * 

If it is, that will be pretty bad cause Google price is 1200 and post split each share is $600 with the other $600 treated as a dividend income. Effectively, I would be paying dividend on my own capital because of the weird stock split.


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## humble_pie (Jun 7, 2009)

orange i don't have the answer, although i imagine that, in due course, the exact correct answer to the taxation question will surface here in your thread.

it somehow sticks in my memory that canadian tax law was draconian in this respect in years past but was amended fairly recently to prevent the very cannibalizing of part of one's own capital via taxation that you are describing.

hint: if worst should come to worst in the GOOG split & it turns out that CRA income tax will indeed devour a portion of one's own capital as fully-taxable US dividend income, here is a strategy for sidestepping the problem using options:

- at some well-chosen date prior to X date which looks to be monday 24 mar/14, sell all GOOG shares & buy 1 call option for each 100 shares of google that had been sold.

- in many cases this will mean only one option contract. Cost will vary according to how deep in the money option goes & also according to time left to expiration of the call. As of today, there are several suitable june calls that could be purchased for $220-270.

- one would thus be completely out of the stock on the record day. One would neither receive nor pay taxes on the 2nd google class C share.

- after all the noise shall have died down - some time in april/14 - investor would then sell his call option & buy back 200 shares of post-split GOOG.


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## orangem (Feb 1, 2014)

thanks. Agree the safest way would be to sell the stock first then do a stock replacement on the same date. However, I would be incurring capital gain tax upon selling.....


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## orangem (Feb 1, 2014)

FYI, if anyone is in the same situation and still pondering on what to do with Canadian taxes and google stock split, one must sell by this Friday because stock isn't transferred until T+3 dates. 

Would welcome more comments on what will happen to a US stock dividend like Google.


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## Amira (Aug 6, 2013)

In the same boat as you - my husband holds Google stock in his TFSA. We wish it *were* just a traditional split; however, because of the tax implications of the stock dividend, we've decided to sell prior to the record date. 

Also, since Google has committed to paying C class shareholders a "top-up" if C and A shares differ in value beyond a set percentage (which I guess will be done via a special dividend payment), if/when we re-buy, it should go in an RRSP account...someone correct me if I'm wrong on this last point please.


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## orangem (Feb 1, 2014)

Wouldn't holdings under TFSA be able to grow dividend tax free?


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## Amira (Aug 6, 2013)

In a non-registered or TFSA account, US dividends are subject to a 15% withholding tax, so I guess I would get 15% less stock (not sure how that would work since we'd then get into fractions) and 15% less of the potential future top-up. It will cost me $20 in commissions to sell and rebuy; whereas the withholding tax would cost me much, much more. 

Also, I spoke to CRA about this, and was told that all the new Class C shares would have to be reported as income on my 2014 tax return if they were held in a non-registered account.


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## googleSucks (Mar 23, 2015)

*broker report new goog shares as dividend*



Amira said:


> In a non-registered or TFSA account, US dividends are subject to a 15% withholding tax, so I guess I would get 15% less stock (not sure how that would work since we'd then get into fractions) and 15% less of the potential future top-up. It will cost me $20 in commissions to sell and rebuy; whereas the withholding tax would cost me much, much more.
> 
> Also, I spoke to CRA about this, and was told that all the new Class C shares would have to be reported as income on my 2014 tax return if they were held in a non-registered account.


sorry for digging up a year old post but I am in this situation where my broker reported half of my goog share value as dividend. Now I have to pay tax on an income that I never had. Anyone has any idea how to offset this unfair tax?

I searched up and down and didn't find much - a Finance Post article talked about these new shares should really be reported with their "par value" @0.001/share instead of their fair market value @500+ but my broker(questrade) insisted that their reporting is correct.

any help is appreciated!


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