In this example, Inland Revenue estimates that the actual benefit is obtained when Class B shares are reclassified as common shares. Instead, a very conditional right to these shares is valued at a significantly reduced value, as there is uncertainty as to whether the qualification criteria will be met. The tax authorities consider that this example, while economically and economically realistic, does not make use of legislation which is compatible with Parliament`s intention and which therefore constitutes a tax avoidance regime. Inland Revenue would attempt to tax the employee on the actual benefit of $800. There are a large number of different employee participation programs and functions for structuring such agreements. Depending on whether the shares are subject to a call option or whether they were acquired a priori (with or without restrictions or conditions), the tax rules vary. The shares are valued at $2,$US per share at the time of the acquisition, so Mr. Wright does not return any income. This is done on the basis that he has paid the market value of the shares and therefore does not constitute any advantage for him from the share purchase contract.
Corp Limited enters into a share purchase agreement with its employee, Mr. Wright. As part of the share purchase agreement, Mr. Wright acquires 100 shares of Corp Limited held for his benefit by Hold Trust (this is the case in year 1). Hold Trust is a trust created for the benefit of the employees of Corp Limited. Mr. Wright does not obtain voting rights, dividends or other rights to participate in the shares as long as they are held by Hold Trust; Instead, these rights are held in trust for Corp Limited. Subject to compliance with certain performance criteria, the shares are sold to Mr. Wright after 3 years.
However, Mr. Wright has the right to refuse the transfer of shares in the event of unshakability. The shares are acquired for 2,$US per share (200 $US) financed by a loan from Corp Limited to Mr. Wright. If the performance criteria are not met or if Mr. Wright excludes from his right the extermination of the crumbling, Mr. Wright must transfer his economic ownership of the shares to Corp Limited to fully satisfy the outstanding loan. If the shares are unshakable and transferred to Mr.
Wright, he will have to repay the loan in cash. To illustrate this example of justification, here is the following example: despite this finding, there are no specific regulations on the seller`s liability resulting from the qualification of the target company under share purchase agreements in the TCC or TCO. . . .