Can You Rely on Your Brokerage for Calculating Adjusted Cost Base and Capital Gains?

Calculating adjusted cost base and capital gains can be a very onerous task.  Canadian investor may question the need to do this themselves when they feel it should be their brokerage’s responsibility.  Unfortunately, brokerages are not required to provide their customers with information on adjusted cost base and capital gains.  In fact, in the general case, it’s impossible for a brokerage to provide an accurate report of adjusted cost base because they don’t always have access to all the required information.  As a result, the onus is on the investor to calculate adjusted cost base for themselves.

Many Canadian brokerages do in fact provide figures on adjusted cost base.  They may refer to these values as “average cost” or “book value.”  However, these numbers are notoriously unreliable.  They are very often inaccurate, and sometimes by a wide margin.  Brokerages do not intend for this information to be used for tax purposes — it’s meant to provide customers with a picture of their gains/losses and returns.  In fact, these values are typically coupled with disclaimers indicating that the information must not be used for tax purposes.  For example, the following disclaimer is displayed below Scotia iTRADE’s “Realized Gain/Loss” report:

“Scotia iTRADE® provides cost basis and associated realized gain and loss information to you as a courtesy service and for informational purposes only and is not for official tax purposes.”

Relying on your brokerage’s potentially erroneous ACB figures can be problematic, no matter which direction the error occurs.  If the reported ACB value is too low (resulting in a higher capital gain) you’ll end up paying more tax than necessary.  If the ACB is too high (resulting in a lower capital gain) you’ll risk getting chased by the CRA.  It’s therefore strongly advisable to calculate these values on your own to ensure correctness.

There are a wide variety of reasons why your brokerage’s ACB values can be inaccurate.  Some of these reasons relate to the fact that your brokerage has an incomplete picture of the required information, while others relate to erroneous calculations and neglected information.

Your brokerage’s ACB and capital gains values may be incorrect for the following reasons:

  1. Brokerages may fail to account for return of capital (which reduces ACB) or phantom distributions (which increase ACB).
  2. Brokerages may fail to account for reinvested distributions when calculating ACB.
  3. Brokerages do not have access to all the required information to determine whether a capital loss qualifies as a superficial loss.  For example, a transaction in your spouse’s account can potentially cause a capital loss to qualify as a superficial loss, and your brokerage has no way of knowing about this.
  4. Adjusted cost base must be calculated by factoring in all identical securities owned.  In other words, ACB should not be calculated on a per-account basis.  If you own the same security through two brokerages, neither one will be able to correctly calculate ACB because neither has a complete picture of all your transactions.
  5. Your brokerage may not properly consolidate your ACB when you own the same security in multiple accounts, even when the accounts are all at the same brokerages.
  6. When assets are transferred from one brokerage to another, the adjusted cost base information is often not communicated between the two brokerages.  In the case, the receiving brokerage may incorrectly set the adjusted cost base to the current market value.
  7. On the other hand, when securities are transferred from another individual’s account into your account (for an inheritance, for example), your brokerage may incorrectly copy over the ACB information instead of using the market value, even though a deemed disposition has occurred.
  8. Some brokerages may allow customers to edit the adjusted cost base/average cost/book value.  This may then become a case of too many cooks in the kitchen with multiple sides meddling with the numbers.
  9. If your brokerage does somehow manage to accurately report ACB, it may be difficult to tell when the number was last updated and whether recent transactions have been taken into account.
  10. Brokerages may fail to properly account for special events such as mergers and acquisitions.
  11. Commissions and ECN fees may be excluded.

For the reasons mentioned above, individual investors need to be responsible for calculating their adjusted cost base. is a free tool that can make this process much less painful.

South of the border, the IRS now requires cost basis information to be calculated by brokerages.  The Emergency Economic Stabilization Act of 2008 dictated that brokerages begin providing this information starting in 2011.  While this has made things easier for investors in the United States, no such requirement exists in Canada.  Such a requirement would be much more difficult to implement in Canada due to the differences in calculating adjusted cost base/cost basis between Canada and the U.S.  In the U.S., cost basis can be tracked using several methods including specific share identification and first-in, first-out (FIFO).  These methods alleviate many of the issues listed above.

21 thoughts on “Can You Rely on Your Brokerage for Calculating Adjusted Cost Base and Capital Gains?

  1. Pingback: Taxable Consequences of Norbert’s Gambit | Canadian Couch Potato

  2. Jason

    In my case, the brokerage only reports the ACB and proceed for a stock, but there is no corresponding entry for the USD. I believe that is in error, correct?



    I would be very surprised if any brokerages do calculate ACB for foreign currency held in the account. And even if they did, the value would most likely be incorrect due to reasons 4, 5 and 6 above.

  4. rob

    I’ve had a pending question I keep forgetting to ask. That is, can you tell me the difference between what they call, “trading on account vs. trading on income” and what this particularly means and which one an individual is?
    thanks, R.



    I’m not familiar with those terms. Do you mean capital account vs. income account?

  6. rob

    Yes. I think that is the term i was looking for. The difference been the two. How does one know which he is? Thx



    When you trade on capital account your gains and losses are reported as capital gains. On income account they’re reported as regular income. There are no clear cut rules for determining whether you’re trading on capital account or income account. The CRA provides some guidelines for how they determine whether your trading is on income account:

    “(a) frequency of transactions – a history of extensive buying and selling of securities or of a quick turnover of properties,

    (b) period of ownership – securities are usually owned only for a short period of time,

    (c) knowledge of securities markets – the taxpayer has some knowledge of or experience in the securities markets,

    (d) security transactions form a part of a taxpayer’s ordinary business,

    (e) time spent – a substantial part of the taxpayer’s time is spent studying the securities markets and investigating potential purchases,

    (f) financing – security purchases are financed primarily on margin or by some other form of debt,

    (g) advertising – the taxpayer has advertised or otherwise made it known that he is willing to purchase securities, and

    (h) in the case of shares, their nature – normally speculative in nature or of a non-dividend type.”

  8. Ken

    Do Cash Distribution / Interest impact the ACB ? I have Cash Distribution that do not impact the number of Units and wondering how those could be handled by the application



    Cash distributions affect ACB when they consist of return of capital. If they’re classified entirely as interest / other income / foreign income / dividends then there will not be any impact on ACB if they’re not reinvested.

  10. lastminutetaxdoer

    I understand that the information from the brokerage may be incomplete and therefore incorrect. But how about the information on the T5008/RL-18? I’ve noticed that some of the figures on my actual monthly account statements (where I base my calculations from, while accounting for ROC, etc.) VS what ends up on the T5008 slip at the end of the year are different. I’m assuming the T5008 slip is more accurate since that is what the brokerage ends up reporting to the CRA? Which figures should I use?




    The “Cost of book value” listed on a T5008 can be inaccurate for the very same reasons listed above.

    In fact the instructions on the T5008 slip state the following:

    “Box 20 – The amount in box 20 may or may not reflect your adjusted cost base (ACB) for the purpose of determining the gain or loss from the disposition of the security. You are required to
    make the adjustments, as needed, to the amount indicated in box 20, at the time of determining and reporting your gain or loss from the disposition.”

  12. Rob

    I am slightly confused on the entry of capital gains/losses on the capital gains section of taxes. I use an online tax filing program and there are 4 columns for entering numbers ie. Proceeds / ACB / Outlays / Gains (loss). For the past 3 years or so i have never entered figures in the ‘Outlays’ column. It seems that on my brokerage trading summary under the ‘Proceeds’ column, the figure there is taking into account a deduction of commission if it is a sell of a security. ie. 500 sh x .24 = $120. But since the ‘Proceeds’ column on trading summary shows $110.05, do i include the $9.95 commission in the “Outlays” column on capital gains tax filing program? Also, if i have a few ‘buys’ of securities throughout the year, can these commissions be deducted on income tax as carrying charges even though they are not YET dispositions? I’m a bit uncertain as to the commissions that are charged just from purchases of securities but not yet sold. i thought one was able to write-off all commissions and not just on disposition of securities? Thanks very much, Rob

  13. Post author


    With your tax preparation software you should be able to either input the proceeds net of the commission and set the outlays to zero, or use the gross proceeds and set the outlays to the value of the commission. Either choice should result in the same capital gain or loss.

    No, the commissions incurred on purchases cannot be deducted as carrying charges. Commissions on purchases should be added to the adjusted cost base, which has the effect of reducing capital gains when the shares are eventually sold (the same effect as commissions on sales).

  14. Mike

    Can you tell me how to deal with mergers in this tool? E.g. when Company A buys Company B, and your Stock B will be converted to Stock A.

  15. Post author


    The tax treatment of a merger can vary on a case by case basis so it is best to verify this for each particular instance.

    In general, if a merger occurs where you receive X shares of Company B in exchange for your existing Y shares of Company A, and assuming the new shares are received on a tax-deferred basis, this can be inputted into as follows:

    1. A sell transaction for Y shares of Company A for a total amount equal to your ACB of Company A immediately prior to the merger. This should result in a capital gain of $0.

    2. A buy transaction for X shares of Company B for the same total amount (your ACB of Company A immediately prior to the merger).

  16. Simon

    I have a question regarding my option assignment:
    May 11 2016:
    sell to open – 3 x WDC @ $35.50 = USD $45.65 –> 1.2852 –> CAD 58.67

    May 13 2016:
    option got assigned
    cost: USD$10,650 – assigned option $45.65, therefore my cost is USD$10,604.35
    CAD cost: $10,650 @ 1.2939 (CAD 13,780.04) – assigned option $45.65 @ 1.2939 (CAD $59.07), therefore my cost is CAD$3,720.97 .

    This is how Interactive brokers calculate the cost in T5008, my question is, how come the assigned option ex rate is not @ 1.2852 (This is the date when we sold the put option)

    Should I use IB T5008 or I should keep track of the transaction myself and submit different figures to CRA?

  17. Post author


    This looks like yet another instance where a brokerage is calculating ACB incorrectly. The proceeds of sale of the options to open should be converted to Canadian dollars on the date when the options were sold to open.

    For cases where no actual currency conversion takes place (i.e., the proceeds of the options sale are left as USD) there is some uncertainty about whether you should use the exchange rate on the date of the sale or the settlement date. However, this does not appear to be the cause of the discrepancy here as they are using the same exchange rate for both the sale to open date and the assignment date.

  18. Paulo Ascurra

    I have a taxable account in Questrade with 5 ETFs. I have received only one T3 and one T16. I assume that they have put all my investing account in one document. I have calculated the ACB using Adjusted Cost for each ETF. However, I do not know where to put that information now for tax purposes with CRA. I am using Turbotax to file my taxes. Please if you can help me , it will be really appreciated. It is the first time I am filing information for a taxable account with Turbotax.
    I know you mentioned several times that the adjusted cost base provided by the broker is inaccurate. That’s why I need help

  19. Post author


    For each disposition you had in 2018, you can input the details (ACB, proceeds of disposition, etc.) in TurboTax by going to:

    Income -> Investments -> Capital Gains and Capital Gains Deduction Profile

    from the left menu.

    We have a guide for this process for SimpleTax, which is a similar process in some ways: Premium also provides annual reports which simplify this process:

  20. Steven


    Returning to your merger example above, I had 14 share of Livongo and due to its merger with Teledoc Health, ended up with 8 shares of Teledoc, which i have yet to sell. My T5008 from questrade lists this as a book value of $1497 and a proceeds of disposition of only $59 (the Cash in lieu of shares i received from merger,) essentially saying I sold the shares for almost nothing. Am I right to think Questrade is wrong in accounting for the merger this way? Should I simply ignore and follow your example to input a sale of the Livongo shares at the ACB and a buy of Teledoc shares at the same ACB prior to the merger? Thanks,

  21. Josh

    I’m fairly new at this. I understand that realized gains are taxable. My question is do “Adjusted Book cost” and “Proceeds of Disposition” have any impact on your taxes beyond figuring out the realized gains and losses?

Leave a Reply

Your email address will not be published. Required fields are marked *