The Canada Revenue Agency (CRA) requires, in most cases, that taxes be paid on capital gains for all property including investments such as stocks, bonds, mutual funds, and exchange-traded funds. In the simplest form, a capital gain is equal to the proceeds received when selling a property, minus the original cost of the property.
As a simple example, let’s assumed that you purchased 100 shares of RY for $50 per share settling on March 3, 2012. Then you sell all 100 shares for $120 per share settling on May 1, 2014. For simplicity, let’s assume that you did not pay any commission on either the purchase or sale transactions. In this case the cost of the shares is equal to
100 shares x $50/share = $5,000
and the total proceeds of the sale is equal to:
100 shares x $120/share = $12,000
This results in a capital gain (applied in the year 2014) equal to:
Capital Gain = [Sale Proceeds] – [Original Cost] = $12,000 – $5,000 = $7,000
This particular example is very simple because there are no transaction costs, and there is only a single purchase transaction and only purchase and one sale where all shares are sold. When transaction costs are incurred, they must be added to the cost of the shares when buying and subtracted from the sale proceeds when selling. The most common transaction costs for stocks are brokerage commissions, but in general transaction costs can include a number of other such as legal fees.
Things become more complex when there’s a series of multiple buy and sell transactions at various price levels. In this case you might ask yourself, when a sale transaction occurs where only a portion of shares are sold, what should I use as the cost when calculating the capital gain? Should I use the cost of the first shares purchased? The most recent shares purchased? The answer is that the CRA requires you to keep a running total of the Adjusted Cost Base (ACB) for tax purposes.
When you buy shares, the total ACB is recalculated to be the previous total ACB, plus the total cost of the new shares, plus any transaction costs:
New Total ACB After a Buy Transaction = [Previous Total ACB] + [Cost of New Shares] + [Transaction Costs]
Or, it can be expressed using the price per share and number of shares purchased:
New Total ACB After a Buy Transaction = [Previous Total ACB] + ([Share Price] x [Number of Shares Purchased]) + [Transaction Costs]
When a sale transaction occurs, the new total ACB must be reduced from the previous based on the proportion of shares that are sold:
New Total ACB After a Sell Transaction = [Previous Total ACB] x (([Previous Number of Shares] – [Number of Shares Sold]) / [Previous Number of Shares])
New Total ACB After a Sell Transaction = [Previous Total ACB] – ([ACB per Share] x [Number of Shares Sold])
The capital gain (or loss) from a sale is calculated by taking the proceeds of the sale (less transaction costs) and subtracting the ACB per share multiplied by the number of shares sold:
Capital Gain (or Loss) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – ([ACB per Share] x [Number of Shares Sold]) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – (([Total ACB] / [Previous Number of Shares]) x [Number of Shares Sold])
Note that ACB can be expressed either as the total ACB or ACB per share. It is important not to confuse the two forms.
As a more complex example, let’s assume the following transactions occur:
|Settlement Date||Transaction||Shares Bought or Sold||Price Per Share||Commission||Share Balance|
Transaction 1 is identical to the first transaction in the previous example
New Total ACB = [Previous Total ACB] + ([Share Price] x [Number of Shares Purchased]) + [Transaction Costs] = $0 + ($50/share x 100 shares) + $10 = $5,000 + $10 = $5,010
Note that a capital gain does not occur for a buy transactions; it only needs to be calculated for a sell transaction.
For Transaction 2, the new ACB becomes:
New Total ACB = [Previous Total ACB] x (([Previous Number of Shares] – [Number of Shares Sold]) / [Previous Number of Shares]) = $5,010 x ((100 shares – 50 shares) / 100 shares) = $2,505
The capital gain for Transaction 2 is calculated as follows:
Capital Gain (or Loss) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – (([Total ACB] / [Previous Number of Shares]) x [Number of Shares Sold]) = (($120/share x 50 shares) – $10) – (($5,010 / 100 shares) x 50 shares) = $3,485
Next, Transaction 3 (a purchase transaction) results in the following ACB:
New Total ACB = [Previous Total ACB] + ([Share Price] x [Number of Shares Purchased]) + [Transaction Costs] = $2,505 + ($130/share x 50 shares) + $10 = $9,015
Finally, Transaction 4 (a sell transactions) results in the following ACB:
New Total ACB = [Previous Total ACB] x (([Previous Number of Shares] – [Number of Shares Sold]) / [Previous Number of Shares]) = $9,015 x ((100 shares – 40 shares) / 100 shares) = $5,409
And a capital loss of $16 occurs:
Capital Gain (or Loss) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – (([Total ACB] / [Previous Number of Shares]) x [Number of Shares Sold]) = (($90/share x 40 shares) – $10) – (($9,015 / 100 shares) x 40 shares) = –$16
As you can see, calculating ACB can become very tedious and complex. The onus is on the taxpayer to track ACB and calculate capital gains. Your brokerage will not, in most cases, perform the calculations for you. And even if they do, the information can often be wrong.
The calculations are summarized in the following table:
|Settlement Date||Transaction||Shares Bought or Sold||Price Per Share||Commission||Share Balance||ACB||ACB per Share||Capital Gain (Loss)|
AdjustedCostBase.ca is a web application that performs all the necessary calculations for you. All you need to do is enter the details of each transaction. Although it’s important to understand the concepts when calculating ACB, AdjustedCostBase.ca makes things less tedious and reduces the risk of human calculation error. Here are the results after entering the transactions from the example into AdjustedCostBase.ca:
This overview is meant to be a general guideline, and will not apply in all situations.
The following are some other details to consider:
- The date used for calculating ACB should be the settlement date, not the purchase date. For simplicity, you really only need to carefully consider the difference between the two dates when the purchase occurs in the last few business days of the year, but the transaction order does matter.
- These instructions assume you’re trading on capital account, not on income account.
- A capital loss can be applied against capital gains occurring in the same year, or the capital loss can be carried forwards or backwards, subject to certain rules.
- ACB and capital gains do not need to be calculated for registered accounts such as RRSPs or TFSAs.
- Distributions in the form of dividends or interest income do not affect ACB. Other forms of distributions such as return of capital do have an affect on ACB. If any kind of distribution is reinvested, this is equivalent to buying more shares and ACB should be increased accordingly.
- If you own the same security in multiple accounts, ACB must be calculated jointly.
- Capital losses may be subject to the superficial loss rule.
Hoping you can clarify the Capital Gain(loss) column in the transactions area for a security. In particular, when I enter a bunch of transactions on same security throughout the year, is the capital gain/loss figure for the very last SALE transaction, the adjusted capital gain/loss amount that would go in column 5 on ‘Schedule 3’ of taxes, or do i have it wrong here, and am I supposed to be adding up all capital gains – all capital losses for the year to get the figure for schedule 3?? My guess is the ACB that keeps getting readjusted recalculates the capital gain/loss up to end of year? Is this right? Some positions I have do not have a “0” share balance yet, and then I have several that do have ACB of “0”. Would love clarification to this if I possibly can . Many thanks! Rob
The “Capital Gain (Loss)” column indicates the capital gain or loss only for each transaction (it is not any kind of cumulative total). When completing Schedule 3, I would suggest that you use a separate line for each sale transaction (even if there are multiple sale transactions for a given year). Yes, the capital gain should appear in column 5.
I had a question regarding a position in a Cdn stock as seen below. My question is how can the capital gain be $562.60 on the initial sell order when my initial ACB is $4255 and the proceed from 1st Sell order is $4307 which in theory is a difference of (-52). Does the 600 remaining shares I’ve kept, in essence, become the capital gain?? Here are my transactions below:
Sell on 2014-Mar-13
Total Amount: $4,312.00
Amount per Share: $0.98
Cap Gain (Loss): $562.60
Share Balance: 600
Change in ACB: —$3,744.40
New ACB: $510.60
New ACB/Share: $0.85
Buy on 2013-Oct-10
Total Amount: $4,250.00
Amount per Share: $0.85
Share Balance: 5000
Change in ACB: +$4,255.00
New ACB: $4,255.00
Thanks very much! Rob
The gain on the sale is calculated as follows:
Capital Gain (or Loss) = ((Share Price) x (Number of Shares Sold)) – (Transaction Costs) – ((ACB per Share) x (Number of Shares Sold))
= ($0.98 x 4,400) – $5.00 – ($0.851 x 4,400)
Since only some of the shares are sold only a portion of the ACB is subtracted from the proceeds when determining the capital gain. Or looking at it another way, you’ve sold shares for $0.98 per share that had an ACB per share of $0.851.
Did I miss your explanation about ACB of shares acquired by an employee? Some companies have stock as a performance bonus. Can the cost of these shares be found in a breakdown of the amount on the employee’s T4 slip? Where does one get the cost for RSU (restricted stock units)?
This is a fairly complicated subject (in particular when you hold onto the shares after acquiring them). I hope to address this soon in a future post.
Hello and thank you for all your help!
So it I understand correctly, better not have a US investment account because it make calculating the ACB even more complicated?
While holding US dollar denominated accounts or investments can make things more complicated (not just in terms of ACB but also due to foreign reporting requirements and estate planning) there are other factors to consider.
For more information on calculating ACB with foreign investments, please see the following:
I am trying to determine which ACB to enter on my taxes. There is a column for “New ACB”. When I enter a sale on my taxes, do I use the New ACB on the same line as the sale or do I use the New ACB amount on the line above the sell?
eg. (numbers aren’t accurate)
LINE 1: BUY – New ACB
LINE 2: SELL – New ACB
If I am entering the sale in line 2, do I use the ACB value in line 2 or line 1?
My second question is, do I enter the total ACB or the ACB/share value?
Thank you kindly
I’m assuming you’re referring to filling out Schedule 3 (or a similar interface in your tax software). For Schedule 3 you should include a line for each sell transaction. Here is the correspondence between the columns on Schedule 3 and the columns listed on AdjustedCostBase.ca:
(2) Proceeds of disposition: Amount
(3) Adjusted cost base: Change in ACB (the absolute value)
(4) Outlays and expenses: Commission
(5) Gain (or loss): Capital Gain (Loss)
Thank you for a concise explanation on the topic. I have a specific question which I can’t find be be addressed anywhere else.
If I acquire a stock in year 2010 and dispose it in 2011 do I enter Acquisition and Disposition in 2011 reporting year OR do I enter, for 2010 Acquisition amount with 0 Disposition and 2011 0 Acquisition with Disposition amount?
On AdjustedCostBase.ca, each transaction is inputted separately.
Thank you for the site. I have a question regarding the tool.
I have a question regarding the following scenario.
1) I have a bank account with $100USD which I got a 1:1 ratio a while ago
2) I purchase a US stock with those US funds when Canadian dollar is worth more at $1.04
3) I sell the stock back to US dollars and the Canadian dollar is now $1.02
4) I purchase a new US stock few days later when the Canadian dollar is worth $1.06
shouldn’t there be a realized loss between 3 and 4? does this tool or any other tools take that into account?
The US cash and US stocks should be treated as separate securities.
A purchase of US stock with US cash results in a deemed disposition of the US cash. It can be seen as first converting the US cash into Canadian cash and then purchasing the US stock with Canadian cash, even though a conversion may not have occurred.
Similarly, a sale of US stock with the proceeds kept in US cash is equivalent to selling the US stock and receiving proceeds in Canadian dollars, and buying US cash with the proceeds.
Yes, AdjustedCostBase.ca can be used for this purpose. Further information on this is available here:
Hey there awesome site. I have a question..
I bought shares in a dual listed stock on a Canadian exchange a few years ago. This year I transferred a large portion of the position to the US exchange but only sold the remaining shares I held onto on the Canadian exchange.
I’m assuming my cost base wouldn’t have changed and i’m only going to be paying capital gains on the small position I sold on to the Canadian exchange but I noticed my broker calculated the transfer to the US exchange as a sell and I re-bought my position with a new ACB.
I don’t think that journaling the shares from one exchange to the other should result in a deemed disposition. Therefore your ACB should not change after transferring the shares to the U.S. exchange.
This sounds like another reason to add to the list for why you shouldn’t trust your brokerage to calculate capital gains for you:
Great site, tons of info, but I can’t quite find exactly what I’m looking for. I’ve been trying to get assistance from various sources about some investing I started this year, but I keep getting the “talk to an accountant” response, then I talk to an accountant who tells me they can only help me if I file through them (even though I’ve offered to pay for their time), except 1 who told me they would help me for 30 minutes for $300, which I am not willing to pay for 30 minutes. I want to file my taxes on my own, so neither option is viable yet.
Anyways, I recently began FOREX trading using an online platform. My account with them is in USD, and I deposit using CAD. I plan on reporting via capital gain/loss treatment (I have a primary job, this is more of a hobby) and I am definitely in a loss. I have my statement from them, and I have thousands of trades – over 500 pages (page 1 gives me a nice summary but it’s all in USD).
So far here’s what I understand:
1) I will need to report on schedule 3
2) I need to input ACB, Disbursement & outlays
3) The amounts must be reported in CAD
What I am trying to figure out:
1) Do I need to convert every single trade individually? (this doesn’t seem reasonable)
2) How do I calculate my ACB?
3) How to deal with the unrealized money that was still tied up in trades
What I know:
1) I know how much CAD I put into the account
2) I know how much USD I had at the end of the year in that account
3) I had some unrealized money at the end of the year (still tied up in trades) – and I know how much was unrealized in USD.
4) How much money I withdrew back into my bank account (in CAD)
5) The fees I paid for those withdrawls.
As an example lets say I deposited $1000CAD throughout the year, at various times, lets say I paid $25 USD in withdrawl fees and withdrew the equivalent of $100CAD back into my bank account. And lets say I had $50USD left in the account at the end of the year with another $25USD unrealized tied up in trades.
Would it be as simple as the following?:
“ACB=1000-50(but I would convert to CAD based on the rate 31-Dec)-25(but convert to CAD based on the rate 31-Dec)”
“Outlays=$25 (but convert to CAD the date the fee was taken)”
“and Disbursements= $100”
Which would result in capital loss= Approximately $850 loss (would be slightly higher once I convert the USD to CAD)
Any assistance would be greatly appreciated!
The calculation method you’ve described sounds similar the calculating gains and losses on income account, but you’ve indicated you want the calculations to be done on capital account. Unfortunately, the process described above is necessary to calculate the gain or loss on capital account.
In some limited cases the calculated results may end up the same whether you use the income account method or capital account method, but that’s usually not the case unless you have a zero share/foreign currency balance both at the beginning of the year and at the end of the year.
Hi, did you mean “shares sold” rather than “shares purchased” in your example “The capital gain for Transaction 2 is calculated as follows:” Same for “Finally, Transaction 4 (a sell transactions) results in the following ACB:”
Yes – I’ve corrected this. Thanks for letting me know.
I’m looking for capital gains calculations done using FIFO. Does your website have this capability?
Sorry but AdjustedCostBase.ca does not support calculating capital gains with the FIFO method. It’s intended for Canadian tax payers only, and the Canada Revenue Agency does not allow that method.
Dividend payments certainly complicate the ACB calculation. Dividends may be re-invested automatically into more shares, or not. Or PARTIALLY re-invested. I gather from other comments here that it is the re-invested portion that must be considered in the ACB calculation, not the original dividend payment? That doesn’t seem right in my mind, because the ENTIRE dividend payment is taxable and it affects the unit price of the shares. Here’s a simple example that illustrates my confusion. 400 shares are purchased for $28000. Next, there is a $140 dividend payment. Dividends are automatically used to purchase additional shares. But fractional shares are not allowed in my account, so $75 is used to purchase 1 additional share, and the other $65 is left behind in cash. What is my ACB now for the 401 shares? Is it $28075? Or is it $28140? I think it should be $28140.
The ACB would be $28,075 (assuming no return of capital). For further information, please see the following page:
If I acquired shares over time in a DRIP, I know how to calculate the ACB.
But what do I enter on Form 3, for the date of acquisition?
The CRA doesn’t seem to offer clear instructions on that. I would suggest either using the year when the bulk of the shares were initially acquired, or if possible list all the years when there were acquisitions.
I assume that RSU sold on the day of vesting to cover taxes are not taken into account in the computation of the ACB. Is that assumption correct?
how do I calculate my ACB when 100 shares I purchased in Boralex Income Fund for $403.95 converted to 497 shares in Boralex Inc, then were redeemed for $497
You’ll need to check up on the details of the taxation of this conversion. But assuming there is no deemed disposition or other taxable event due to the conversion, it would be equivalent to the following transactions:
1. Sell 100 shares of Boralex Income Fund for the total ACB at the time of conversion.
2. Buy 497 shares of Baralex Inc. for that same total ACB.
Hi. I bought the same stock over two years, and sold some shares, but not all, recently (current year). How do I report the acquisition date and disposition date? e.g. BUY 1000 in Oct 2014; BUY 1000 in Feb 2015; SELL 500 in March 2015.
To make it a bit more complicated, let’s add another SELL in April 2015.
My general problem with the reporting is how to deal with selling small amounts of a larger holding, when the stock has been held for a few years.
If your question is about completing Schedule 3, then I would suggest putting all the years in column (1) (year of disposition). Each disposition can go on a separate line.
My son inherited 250 stock from his grandmother in 1996. The stock split 2 for 1 in 1999. He placed the stocks with a brokerage in 2014 and sold them in 2015. For his ACB, would he use the historic value of stock the day he received them in 1996 for 250 of them? Then the value of the Stock in 1999 for the remaining 250?
The initial ACB would be the fair market value on the date of the transfer in 1996. The stock split should not affect total ACB nor does it trigger a capital gain. For further information on splits, please see:
A mutual fund annually “sells” a couple of units as a commission type of fee.
When recording these, I have adjusted the ACB and I have calculated the capital gains or loss and reported them on my tax forms. My question is does a capital gain on this type of sale get added to the ACB since I am taxed on it without actually receiving it similar to a reinvested dividend? Or can I deduct the capital gain along with the fee as an investment expense?
I purchased 25 shared of Hertz and paid $536.45. Not after a confusing transaction (the company effectively split into two entities), I now own 1.666667 shares of HRI (formerly Hertz due to a 15:1 revers stock split) and 5 shares of a newly formed company, HTZ. How do I allocate the original cost of $536.45 to what is now two separate holdings?
That sounds like a foreign spin-off. More information about that can be found here:
By default, the receipt of the foreign spin-off shares are deemed to be foreign dividend income, taxable when they’re received, based on fair market value. However, if certain conditions are met, you can elect to defer paying taxes on the distribution, and allocate the previous ACB based on the relative fair market values of the shares. The link above shows an example of this.
The CRA has a list of eligible foreign spin-offs here:
Note that Hertz is not yet on the list, but you may want to give it some time as the spin-off was just announced a few days ago.
You’ll need to make an election along with your tax return to have the spin-off treated this way, and there are restrictions about how you can file your return with the election.
Thank you, very helpful.
I have shares, held in my name only, in certificate form. I have a joint brokerage account with my spouse. My spouse has a brokerage account, in his name only. There are shares of some companies held in all three “names” e.g. Royal Bank common shares: held in my name only (share certificate), held in our names (brokerage account) and held in my spouse’s name (brokerage account).
For tax purposes I declare all the dividends in the joint account on my tax return (the money invested came from me).
My question is: Do I treat all three “names” as separate persons for ACB recording purposes or does the CRA require some other treatment?
Fantastic website, thank you!
Hi I am evaluating a job offer where they included RSUs in cash in the compensation plan. I work in Canada and the RSUs will be issued in USD. I can cash them out every quarter, if I choose to. I would like to understand what would be the tax implication for me. Does RSU work to my advantage or would I end up paying more tax? Thank you.
I bought shares of Company X in my name in one account and on a separate date for a different price, my wife and I jointly bought more shares of Company X in our joint account (50/50 contribution) . If I decide to sell my shares but not the jointly owned shares, is my ACB simply my purchase price plus transaction costs in my own account or do I have to recalculate my ACB in consideration of the purchase of shares in the joint account? Thanks
I did have some problem following the multitude of Parenthesis in your examples. Have you considered simplifying things by defining “Proceeds of the Disposition” ? This term is used by CRA and often is reported on tax documents. In your examples this would combine many factors into one number and greatly simplify the explanation.
Thanks for your feedback. I’ve replaced the round parentheses surrounding the value names with square brackets. Hopefully this will improve the readability.
Wow, all of this is really confusing, but your site is really helpful. I do have a couple of questions though.
1. I use an investment firm to take care of my investments, and their statements do not indicate the fees or amount of commissions I’ve had to pay when a transaction of buying or selling takes place. How can this be determined?
2. Within a specific fund, I have holdings in the same type of security but in 2 different series (for example, one is Dynamic Dividend Series A,FE and the other is Dynamic Dividend Series A, DSC). Often there will be a switch sell/buy between the two securities (same amount of share at the same cost), except one security is shown as a sell, whereas the other is shown as a buy. For ABC calculations, do I combine both of these together or do I have to calculate ACB on each separately?
3. Whenever such a switch sell/buy transaction takes place between the two securities, I always end up having to adjust manually my book value of each of these securities to reconcile it to the book value shown on my statement. Oftentimes, these amounts are the same for each security, except one is positive and the other negative – with no impact on the amount or units held. What are these (book value) adjustment amounts to be recorded as when calculating the ACB for each security separately? Or are they to be ignored altogether in the calculation of ACB?
Can you please help me with this example:
I know it is hard to read numbers above as the copy and paste from my entries is off-centre, but basically I had 1550 shares prior to the Jan 7/16 consolidation of 1:15 shares which left me with 104 shares. So in Dec of 2016 I phoned brokerage and told them to dispose of those shares or sell as the amount I was gonna get was not even gonna cover commission. Hence the sale went through but no commission was charged by brokerage and no ‘proceeds’ recorded on my trading summary. So, my question is, how do i enter this final entry in my ACB spreadsheet above to determine my capital loss?
If the commission is equal to the value of the shares such that the net proceeds are zero, then the calculation method is the same. Simply input the amount and commission into AdjustedCostBase.ca as they are. The calculation method and formulas above are also still valid even when the commission exceeds the value of the shares, resulting in negative net proceeds.
Can you pls help with this scenario I have with a US stock sale. My balance of shares up to now was 100 and then, let’s call it ‘Company A’, split into 2 traded companies and as a result I ended up with 11 shares of company A and 33 of the new Company B. I don’t know how I can input the sale of the 11 Company A shares i sold at 31.30 in 2016 ie. ‘reverse split’? I’m guessing that the total proceeds of these 11 shares of company A is not the figure I should be using or paying capital gain on, because I now have 33 shares in the 2nd company (is this a Return on Investment when I claim this sale?) This is what happened below:
‘Company A’ announced [yesterday] that the Board of Directors has approved the completion of the company’s separation into two independent, publicly traded companies. The separation is scheduled to become effective before market open on November 1, 2016.
As previously announced, the separation will occur by means of a pro rata distribution by Company A. of 80.1% of the outstanding common stock of Company A. The other 19.9% of outstanding common stock will be retained by Company B.
Stock split approval pending: Earlier this year Company A announced plans for a reverse stock split of CompanyA common stock at a ratio of 1 for 3 and a proportionate reduction in authorized shares of its common stock. A special shareholder meeting will take place on October 5, 2016 to seek approval of this reverse stock split and authorized share count reduction.
Distribution of shares: If the reverse stock split is approved, at the time of separation Company A shareholders will receive one share of the new Company A common stock for every three shares of the of the old Company A common stock held. If the reverse split is not approved, shareholders will receive one share of the new Company A for every nine shares of the old Company A common stock held. In addition all Company A shares held at the time of separation will become Company B shares. Company A also noted that no fractional shares will be issued in the distribution, and shareholders of record will receive cash in lieu of fractional shares, paid on November 1, 2016. The record date for the distribution is October 20, 2016.
Thanks very much! rob
What you seem to be describing is a foreign spin-off. The CRA has some information on foreign spin-offs here:
Depending on the details, the spin-off can either be taxable as foreign income, or the spin-off can occur on a tax-deferred basis.
The CRA publishes a list of foreign spin-offs that meet the requirements for tax deferral here:
Assuming that the spin-off is taxable as foreign income, then the fair market value of the shares that are spun-off would be taxed as foreign income in the year of the spin-off. Your ACB for Company A would remain the same while your ACB for Company B would be equal to the FMV at the time of the spin off. This can be inputted into AdjustedCostBase.ca as follows:
1. Split for Company A with a ratio of 11-for-100.
2. Buy 33 shares Company B for the FMV at the time of the spin-off.
You would also report foreign income equal to the FMB of Company B at the time of the spin-off.
Now, let’s assume the spin-off is eligible to be treated on a tax deferral basis. You would need to make an election on your tax return in order to take advantage of the tax deferral. Then, some of the total ACB for Company A would need to be reallocated onto Company B such that:
– The ratio of total ACB of Company A to total ACB of Company B is equal to the FMV of the shares of each company right after the spin-off.
– The total ACB of Company A before the spin-off is equal to the total ACB of Company A plus the total ACB of Company B right after the spin-off.
To give you a more concrete example, let’s assume that your total ACB for Company A before the spin-off was $1,000. Assume that the FMV of your 11 shares of Company A was $1,800 right after the spin-off, and that of Company B was $200. This would mean that the ACB for Company A is reduced by $100 ($200 / ($1,800 + $200) x $1,000) to $900 and your initial ACB for Company B becomes $100 (with the total ACB of both companies remaining $1,000).
This can be inputted into AdjustedCostBase.ca as follows:
1. Return of capital for Company A with a total amount of $100.
2. Split for Company A with a ratio of 11-for-100.
3. Buy 33 shares of Company B for a total amount of $100.
My question for you today is about instalment receipts. In 2015, Emera Inc Instalment Receipts were purchased and in 2016 some were sold. Later in 2016, the instalment receipts matured and the final instalment payment was paid. In exchange, Emera Inc shares plus cash were received.
To determine the ACB, I entered the amount that was paid in 2015 and the number of instalment receipts received. For the sell transactions, I entered the number of instalment receipts sold and the amount received for the sale.
For the final instalment payment, I entered a buy transaction with the final payment amount and ZERO for “shares”. For the shares received, I added a new security and entered a buy transaction for the number of shares received with the value per share that was provided by Emera.
I’m fairly certain the above is correct, but if it is wrong please correct me.
Now, how do I handle the cash received? My first thought was to enter a sell transaction with the cash received as the amount, resulting in a large loss; however, the tax package from my advisor lists the cash as received interest and is included in the total on my T5. If the cash received is taxed as interest, how do I record the maturity of the instalment receipts? Do I “zero-out” the instalment receipts by entering a sell transaction for the remaining instalment receipts with the amount equal to the ACB?
Really appreciate all the work you put into this website.
Question …..How exactly is the “Change in ACB” calculated?
(as per the “Change in ACB” entry that is included within the Excel document provided via “Download All Data to Spreadsheet” and which in turn is included in Schedule 3 of a tax return)
The change of ACB on AdjustedCostBase.ca is equal to the change in total ACB for each transaction. The way this is calculated depends on the transaction type. For a buy transaction this will be equal to the total cost of the shares plus commission. For a sell transaction this will be equal to the ACB per share multiplied by the number of shares sold.
I inherited some stock from my mother last year. She realized a capital gain on the deemed disposition of her shares on the date of her death. The stock was held in her trust for approximately 7 months after her death, and was then transferred to me as stock. Does the trust realize a capital gain on the increase in value of the stock during the 7 months after my mother’s death, and my ACB is the value at the date of the transfer, or is my ACB simply the value of the stock on the date of my mother’s death, and the estate does not have to realize the capital gain? Is there an option to do it either way, or is only 1 way correct? Thanks.
There would be a deemed disposition upon death based on the fair market value on the date of death that would result in capital gains on her final tax return (unless assets are transferred to a spouse). Your ACB would be based on the fair market value on the date the shares are transferred to you. I would think the estate would incur capital gains based on the change in value from death until the time the assets are disbursed, but I am not an expert in this area so I can’t say for sure.
Could you please clarify the calculation for distributions with capital gains.
When CDS Tax Breakdown Service reports a capital gain distribution as a PERCENT, would it be:
Capital Gains = Total Distribution x Capital Gain Percent
And when CDS Tax Breakdown Service reports a capital gain distribution as a RATE, would it be:
Capital Gains = Share Balance x RATE / Dollar Amount / Share
The per share amount when a distribution component is given as a percentage of the total distribution can be calculated as follows:
[Value] x [Total Distribution ($) Per Unit] / 100
The total distribution amount should be used rather than the total cash distribution amount.
I’m sorry, your response remains unclear to me. What value are you referring to? Please clarify, perhaps with a concrete example using BMO Low Volatility Canadian Equity ETF (ZLB) from 2016 Tax Year.
For the December 29, 2016 distribution for ZLB for example, it shows 9.44050% capital gains and 5.8796% return of capital, with a total distribution of $0.17/unit. So the capital gain and return of capital values would be as follows:
Capital gain = 9.44050% x $0.17/unit = $0.016049/unit
Return of capital = 5.8796% x $0.17/unit = $0.009995/unit
Great! Thanks for clarifying. That is helpful. Interestingly, I discovered your formula and my formula consistently yield the same answers.
When there is a capital gain as part of the distribution, does this reduce the ACB by the total amount of the capital gain similarly as it does for the return of capital?
A capital gains distribution will not affect ACB. It results in a capital gain for the year of the distribution, and should also be included on your T-slip.
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Does your calculator take DRIPing into account? Many long term investors buy and drip shares for years before selling. This is what makes the calculation complicated as any investor doing this is buying small amounts of share at different prices 4 times a year.
Yes, AdjustedCostBase.ca does support DRIP transactions. For further information please see the following:
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Wonderful app, thanks so much for building and maintaining this!
Right now I’m going through the record of all transactions on an American mutual fund first purchased over 20 years ago in preparation to pay taxes in Canada on its sale. I’ve been doing my conversions for each transaction with the Bank of Canada published exchange rate on that date. By the way, if anyone needs daily exchange rates reported by the central bank of each country going back to 1995 (the Bank of Canada website seems to only have the past ten years), they’re available here: https://www.imf.org/external/np/fin/data/param_rms_mth.aspx
My question is about the transactions that are “sales” of shares done by the mutual fund company for paying taxes and also for account maintenance fees. How would these figure into the ACB and how should they be entered using AdjustedCostBase.ca?
I believe that a sale to cover taxes and fees would be considered a disposition just like any other sale, and should therefore be inputted as a “Sell” transaction on AdjustedCostBase.ca.
The Canadian stock Patient Home Monitoring is spin off into two stocks Patient Home Monitoring and Viemed Healthcare on December 21,2017. Can you advise me how I can allocate the original ACB of Patient Home Monitoring to the ACB of the new Patient Home Monitoring and ACB of Viemed Healthcare.? Thanks a lot!
Please see the following:
Question – if I sold shares for a capital gain in my cash (non registered) USA account can I offset this with capital losses from my cash (non registered) CDN account? The two accounts have different account numbers but are both under the same name and grouped together by my broker.
Your capital losses can be used to offset any of your capital gains, whether they occur in the same brokerage account of a different one.
Thanks in advance!
I hold shares of Vanguard Total Stock Market ETF (VTI) in my non registered account from long ago (with significant lower ACB per share than today’s share price). Now I wish to buy some more shares of VTI for the specific purpose of transferring the shares in kind to my registered TFSA and RRSP accounts. So basically I wish to buy X shares, then transfer X shares out.
1) The in-kind transfer-out of shares from non-registered account is considered similar to a sell, and subject to capital gains?
3) Is there any special rule where capital gains can be avoided or deferred? Like if the buy and transfer out occur on the same day?
When you make an in-kind contribution from a non-registered account into a registered account, you have deemed to have sold the shares. You will be required to pay taxes on the capital gain (although capital losses are denied according to the superficial loss rule).
In the scenario you’ve described it would most likely be beneficial to make a cash contribution into your TFSA and RRSP accounts. Then there won’t be any immediate capital gain (the capital gain on the shares in your non-registered account will be deferred until you sell them within your non-registered account).
Does CRA use the ‘first in first out’ principle for determining the Cost Base for multiple share purchases?
For example, if you purchase 500 shares ABC at $50ea and 500 shares of same stock later on at $90ea, followed by selling 600 shares of ABC at $100 each , would your proceeds be computed as: 600 x $100(for $60,000 proceeds) and your costs computed as: 500x$50 +100x$90 or $34,000 (total costs of the 600 shares using FIFO) for a net gain of $26,000 (ignoring commissions).
If we used the average cost principle and I am highly doubtful of this approach…..
With this calculation, we would report report proceeds of 600x$100 (60,000) less the average cost of $70 each (600x$70) or $42,000 resulting in a net gain of $18,000.
Of course, one would have to remember that the value of remaining 400 shares would be at the ‘average’ price of $70 and any subsequent gain would have to be calculated at that base cost (which would be pretty difficult to track in my opinion).
One might find an easier time if they simply used the actual cost of the remaining 400 shares which would have been $90 each…but that’s another story.
so what is the actual calculation as per CRA requirements? Why do they want the trade confirmations as records to be kept?
True costs would be the simplest and easiest approach? no??
because the ‘history of computing the ‘average’ costs gets washed away when you sell parts of your position. How is one to compute the average cost of the remaining shares unless that average cost is carved in stone somewhere at some point in time. We don’t have the ability to do that without recreating the entire history and we know that the financial institutions do not compute ‘book value’ or ‘cost’ accurately. What we do have, however, is the history of trade confirmations. Those trade confirmations will always give us the # shares and the sale or cost price. I think this is what CRA would be guided by and what we should be guided by. The ACTUAL cost.
This KISS approach.
The CRA requires Canadians to use the adjusted cost base method. Other methods, including LIFO and FIFO, are not permitted.
RE: Capital Gains Dividend
Should I be recording the amount of the dividend that is capital gains i.e. entering the cap gains dividend as:
%capital gains x cash distribution per unit
AdjustedCostBase.ca accepts either total dollar amounts or dollar amounts per share for capital gains dividend transactions. If you have the total distribution per share and the percentage of that that is capital gains, then you can calculate the dollar amount per share as you’ve described.
Hi. I sold a rental property which I owned for 11 years while a non-resident. I had to pay CRA 25% of the selling cost. Then I made an application to CRA for a Certificate of Compliance. During their review of the application, CRA contacted me about the allocation of the selling price between the property and the building. CRA proposed that they would allocate 90% to the building and 10% to the property. I have not claimed any capital cost allowance over the entire period I owned the property. I asked the agent to explain why CRA proposed the allocation split of 90 – 10 but she did not know why. Can you tell me what the reason might be and if will have an impact on the amount of tax I pay? Thanks.
You should probably see a tax lawyer. Paying 25% of the selling price seems excessive if you have never claimed any CCA. You should only be taxed on the difference between the purchase price (and renovations) and the selling price. Having had rentals myself I know that the on going renovations to maintain property that is being rented is substantial and greatly cuts into the actual income made on the sale of the property.
The allocation of 90 – 10 should be based on the actual value of the building and the land which can probably be confirmed by the real estate agent that sold the property.
Hi! I have a stock that spun off into another company. Therefore Bought 1000 shares of Company A which became 545 shares of Company B. Then there is a Dispostion in the amount of 5015.53 as an Escrow of Company A. How do I reconcile this in Loss/Gain as I have ended up with $5015.53 and the 545 shares of Company B.
This will depend on the tax treatment for this particular case. In some cases, spin-offs occur on a tax-deferred basis while in other cases there is a deemed disposition. Also, in cases where both cash and shares are received, there should be a deemed disposition for the cash portion at least, and usually you’ll need to allocate part of your ACB based on the fair market value of the shares received in proportion of the cash to determine the capital gain.
Thank you so much for your guidance. Just to be sure that I understand what you are saying can I do the following:
1. Bought 1000 shares of company A for $69,654.50. Company B bought Company A.
2. Got 545 Shares of Company B which I am still holding on to. I checked the market value listed on my statement when the xfer was made from Company A to B and it lists is as $58935.37 plus cash for $6256.90 for a total of $65192.27
3. This created a shortfall of 65912.27 – 69654.50 = 4462.13
4. Since I am still holding on to the 545 shares I would prorate this to the cash that I got and so I would do:
5. I would report the loss of $400.82 for the cash that I received.
6. Moving forward when I sell the shares I would just look at the sale price minus the original buy price – outlays/expenses and report the loss/gain.
Does this make sense? Thanks so much.
In its March 2013 budget, the federal government announced changes to prevent the use of financial arrangements involving derivatives contracts that allow for the character conversion of ordinary income to capital gains. It gave time to funds using these ‘forward’ derivatives to unwind them. The result of unwinding was a fund of mine (that used these derivatives) sends me T3 slips with capital gains, but I do not receive any corresponding cash distribution.
For tax purposes, am I correct in assuming that I would pay capital gains taxes based on the T3 but deem the proceeds to be reinvested with the fund, thereby adjusting my cost base upwards for when I ultimately sell the fund?
When a capital gain appears on your T3 slip, it can either correspond to a cash distribution or a phantom (non-cash) distribution (and in some cases could be a combination of both). In either case, you will incur a capital gain for this amount in the year of the distribution. In the case of a cash distribution, the amount does not affect your ACB. In the case of a phantom distribution, your ACB should be increased by the amount of the phantom distribution.
Further information about phantom distributions is available here:
Note also that AdjustedCostBase.ca Premium provides a feature that allows you to easily import phantom distribution data for many funds:
The tax treatment of an acquisition varies case by case, so you will need to investigate the tax consequences for this particular case.
If the distribution of the shares is made on a tax-deferred basis, then the likely scenario is that you would incur a capital loss in proportion to the cash received. The capital loss would be equal to ($6,256.90 – ($69,654.50 x ($6,256.90 / $58,935.37))) = $1,138.00. Your new ACB for the Company B shares would likely become equal to ($69,654.50 x ($58,935.37 / ($58,935.37 + $6,256.90))) = $62,969.33.
On the other hand, if the distribution of the shares is not made on a tax-deferred basis, then you would incur a capital loss of (($58,935.37 + $6,256.90) – $69,654.50) or a loss of $4,462.23. The new ACB for the Company B shares would become the market value of $58,935.37.
However, these are just general guidelines and as I mentioned the tax treatment for a particular case may be different.
Thank you so much for your guidance. Who do you approach to find out if this was done on a tax deferred basis or a non tax deferred basis?
Let’s say I decide to give away, in-kind, 1 share of a security as a gift to my friend. Not charitable, no costs, the logistics don’t matter.
Do I simply reduce the count of shares I have by one and the Total ACB by the average cost of one share and go on tracking as normal?’
When gifting a share to a friend, most likely a deemed disposition would occur. You would incur a capital gain based on the fair market value, and the total ACB would be reduced as you’ve described.
It came to my attention, while preparing my 2017 Income Tax that I should be able to claim a Capital Loss on 494 shares of Nortel Networks, for 2009 according to Section 50(1) of the Income Tax Act. These shares were obtained on May 5, 2000 from the spin-off from Bell. I did not purchase or sell any further Nortel shares. I have sought professional advice and done extensive research on the internet, but most of the answers I am getting seem to be ambiguous. The sale price of shares on May 5, 2000 was $79.06 as far as I can determine, so would it be too simplistic of me to think that the ACB would be 494 x $79.06 = $39,055.64. Maybe I’ve made this more complicated than it is, but I would really appreciate your help. Thank you KK
the Nortel spin-off was done on a tax-deferred basis (with the exception of any cash paid in lieu of fractional shares). You ACB for BCE should be reallocated such that 69.21% is allocated to Nortel and 30.79% allocated to BCE at the time of the spin-off.
So your ACB for Nortel after May 5, 2000 should be equal to 69.21% of your ACB of BCE just prior to the spin-off, while your ACB for BCE would become 30.79% of its prior value. The ACB should not be depending on the market value at the time of the spin-off.
This can be inputted into AdjustedCostBase.ca by calculating x = ACB of BCE just prior to the spin-off and then adding the following transactions:
1. BCE – Return of Capital for a total amount of x.
2. Nortel – Buy the number of Nortel shares received for a total amount of x.
I recently sold 1000 shares at a loss, then repurchased the same stock 2 days later and sold again the same day at break even. What happens to the initial capital loss since now its a superficial loss? Can this loss still be used against my capital gains? Thanks
The superficial loss rule most likely does not apply in that situation. Please see the following:
If a company spun out part of itself into a new company – and we were given “x” amount of shares in the second (new) ticker – what would the ACB on that look like?
The tax treatment of a spin-off can vary from case to case, so it’s best to check the company’s web site or inquiry with them.
In some cases, the spin-off may be taxable as a distribution equal to the fair market value of the new shares. In that case, the ACB of the original company should remain the same and the ACB of the new company should be equal to the fair market value of the new shares at the time of the spin-off.
In other cases, the spin-off may occur on a tax-deferred basis. In such cases, some of your ACB of the old company is reallocated to the new company based on the ratio of the total fair market values at the time of the spin-off.
As a follow up – they mentioned to me that “We have been advised that there is a zero cost base for the dividended shares”
I assume this means an ACB of $0 (and not zeroing out by having the ACB equal the amount given?)
To clarify further above …. I either enter an ACB of $0 or $300.59
I’m just unclear on the wording of “zero cost base”… whether it in fact means to enter a $0… or to enter an equal amount as book value so that they ‘zero’ each other out.
Based on that it sounds like the original ACB of the new shares should be $0 and the ACB of the old shares would remain the same.
The CRA guidelines seem to contradict your assertion that ACB must be reduced after a sale. Specifically, in Example 1 and 2 under https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains-2016.html#P1187_82776 notice that ACB remains unchanged after a sale, in spite of the number of shares decreasing. Using your formula results in a different ACB number.
If you could please elaborate on the discrepancy you’ve noticed, that would be appreciated.
Please note that ACB per share does not change after a sale. But total ACB does change.
Sorry, my mistake. Your calculation refers to Total ACB which corresponds to Cost in CRA’s calculation. I thought your Total ACB referred to their ACB value, but the latter is ACB per share.
In your example, under
“The capital gain for Transaction 2 is calculated as follows:”
you have the following formula
Capital Gain (or Loss) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – (([Total ACB] / [Previous Number of Shares]) x [Number of Shares Sold])
should it not be
Capital Gain (or Loss) = ([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – ((Previous Total ACB] / [Previous Number of Shares]) x [Number of Shares Sold])
Previous Total ACB rather than Total ACB?
I think what you meant to say was
Capital Gain (or Loss) =
([Share Price] x [Number of Shares Sold]) – [Transaction Costs] – [New Total ACB]
Yes, the ACB just prior to the sale should be used.
The last formula you mentioned is not correct.
Do you know how the ACB would be calculated for a private placement done? What day would the settlement day be? The date of the placement closing/new release? Not sure if the date shows in the broker for when shares appeared in the account.
Consider a mutual fund that quarterly (or annually) removes a few units as a management fee. How does this kind of transaction affect ACB? Does it generate a taxable capital gain/loss?
23 March 2011
Bought 3 shares GOOGLE inc CL-A $560.865/shares ,1682.60 USD+27$=1709.60USD
($ 1679,04 ACB CAN$ )
7 June 2011
Bought 3 shares GOOGLE inc CL-A $525.26/shares , 1575.78 USD +27$=1602.78USD
( $ 3240.90 new ACB CAN$)
4 June 2013
Sale 1 share GOOGLE inc CL-A $869.69/shares, 869.69 – 13.50= 856.17 USD
($ 2700.75 new ACB CAN$)
So I had 5 shares GOOG
2014 GOOG has 2 splits:
5 GOOGL CL-A (ALPHABET CL-A)
and 5 GOOG CLC (ALPHABET CL-C)
8 February 2017
Bought 1 share ALPHABET CL-C ( GOOG) $803.0417 /shares, 803.04 USD+13.50= 816.54 USD
Now I have:
5 ALPHABET CL-A
6 ALPHABET CL-C
Could you help me how to calculate my acb? I’m not sure but I think they didn’t give the same value to ALPHABET CL-A and ALPHABET-CLC (split 2014)
The tax consequences of the Google/Alphabet spin-off are unfortunately not clear cut. Here’s a good summary:
Assuming that you reported foreign income of US$0.001 per share, this should be your initial ACB for the Class C shares. This can be inputted into AdjustedCostBase.ca as a “Buy” transaction for a per-share amount of US$0.001 converted into Canadian dollars.
If you reported foreign income of US$569.74 then the above would also apply, with the only difference being that the initial purchase of Class C shares should be that per-share amount converted into Canadian dollars.
In either case, the ACB of Class A shares in unaffected by the spin-off.
— 23 March 2011, I bought GOOGLE INC CLASS A (GOOG)
3 shares/560.865 = 1682.60 USD + 27= 1709.60 USD
— 7 June 2011, I bought GOOGLE INC CLASS A (GOOG)
3 shares/ 525.26 = 1575.78 USD +27 = 1602.78 USD
— 4 June 2013, I sold GOOGLE INC CLASS A (GOOG)
1 share/869.69USD -13.50 =856.17 USD
I owned 5 shares Google Class A (GOOG)
January 2014 (spin off Alphabet)
I would now owned 5 Alphabet Class A (GOOGL) and 5 Alphabet Class C (GOOG).
Since 2 days I am very confused and I have no idea how to enter data in your software.
Do I have to divide by two amount ex: 1719.60 /2 1602.78 /2 856.17 /2
Thank you for your help.
Assuming that you are considering the spin-off of Class C shares to be acquired at par value you would input the following transactions into AdjustedCostBase.ca:
1. Buy 3 Class A shares on 2011-03-23 for a total of USD$1,709.60 converted into CAD$
2. Buy 3 Class A shares on 2011-06-07 for a total of USD$1,602.78 converted into CAD$
3. Sell 1 Class A share on 2013-06-04 for a total of USD$856.17 converted into CAD$
4. Buy 5 Class C shares on 2014-04-02 for USD$0.001 per share converted into CAD$
Note that all USD$ amounts need to either be converted into CAD$ before inputting the amounts into AdjustedCostBase.ca or you need to use an exchange rate. For further information about calculating ACB for securities denominated into foreign currencies please see the following:
What do I do if I don’t know the original purchase price of the item?
Example my dad bought silver bars years ago (approx 30) and he no longer has the sales receipt. He sold them last year and has the T5008 tax slip but box 20 is blank. What do I do?
You can find some suggestions here:
Hi, I received stock grants in 2018 from my employer. There was an amount in box 38 on my 2018 T4 slip for these stocks. So I was taxed on the value of the stocks in 2018. I sold these stocks in 2019. The T5008 requires that I complete box 20 the ACB. I did not actually pay for these stocks only the tax on the value. How or what amount should I enter in box 20 on the T5008?
For the acquisition of the shares, your initial ACB would be equal to the amount in box 38 (stock option benefit) plus any additional cost to purchase the shares. If there was no cost then your initial ACB would be equal to the amount in box 38. If you already owned some shares then your ACB for these should would increase by this amount.
Otherwise, your ACB and capital gains can be calculated in the same way described above.
I’ve been participating in my company stock purchase plan for a number of years as well as receiving RSUs each year. I had not been selling any company stock until very recently so a fair bit had accumulated. Even though the ACB has come down when I’ve added sell entries in the web tool, I’ve noticed that my ACB/share has not reduced and is only increasing. Is this normal? Thanks!
Your ACB/share will not change as a result of selling shares (unless you sell all your shares, in which case it will become undefined).
If you buy additional shares at a price that’s greater than the ACB/share immediately prior to the purchase then your ACB/share will increase. If you buy shares at a price that’s less than the ACB/share immediately prior to the purchase then your ACB/share will decrease.
Hi, Thanks for your speedy reply on my previous question. I have a new question regarding RSU stock grants. I was granted 38 RSU in November 2018. These vested in November 2019. At that time I received 22 vested shares. The remaining 16 shares were sold to cover the withholding tax. I sold these shares in early December 2019. The amount included in box 14 and box 38 on my T4 was for the total 38 shares and a deduction for tax withholding for the 16 shares. My question is: What amount should I use for the ACB on the sale of the 22 shares: the full amount in box 38 (38 vested shares) or the fair market value at the sale date for the 22 shares only?
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I recently purchased BYP.UN (100 units)., in my non-registered account.
I didn’t realize there was a little more involved than 2 other REITs I have.
I like to track adjusted cost base via spreadsheet, year to year, for when it comes time to sell.
Could you please advise which of these T5013 Boxes will increase or decrease the ACB; I’m just not getting the $1.75825.
Alternatively, I could just shunt it over to my RRSP (I have room) and deal with the small cap.gain if there is one – more than likely cap.loss (which I can’t use in that case).
Sorry folks – continued from above:
Which Boxes increase or decrease the ACB – I’m not getting the $1.75825
Your ACB should decrease by the amount of return of capital.
Brookfield has an example ACB calculation here:
ACB adjustments for partnerships are usually shown as subtraction of the cash distributions followed by an addition of the taxable income allocation. I believe this should almost always be equivalent to return of capital (unless your ACB is so small that it is reduced to zero) since return of capital should be equal to the difference between the cash distribution and the tax allocation.
My dad worked for Bell for all his life and purchased Bell shares over the years. He passed away 4 years ago and now my mom would like to start selling off some of the shares. I don’t have record of all the purchase price(s)and when each share was bought. Is there any way to report these shares for tax purposes without knowing the cost of each purchase?
For some suggestions on determining you capital gains with incomplete records, please see the following:
For Bell shares you may be in luck because BCE has an online calculator:
My wife has a matching share program with her employer, a London based company. Shares are LSE and denominated in GBP, although she is a Canadian resident for tax purposes. She had shares vest during 2020 so now I’m wrestling with getting a grip on her ACB.
She purchases and has shares matched on a monthly basis but the matching shares are not actually awarded until the vesting date. The purchased shares are easy to track ACB but the matched shares are confusing me.
In general, should the ACB on the matched shares be tied to the exchange rate and share price at the “award date” or at the vesting date?
Thanks for you remarks.
I am one of those investors that did not realize you had to carefully track the adjusted cost base. I have used the average cost calculation of my brokerage as my investments are all DRIP’s. I tend to buy stock for dividend yields and hold onto them over time.
Is there a major difference between the average cost and the adjusted cost base? And would you know if the CRA accepts the average cost for capital gain calculations?
The cost value reported by your brokerage may or may not be accurate. Here is a list of reasons that can cause the reported value to be inaccurate:
Thanks for the quick reply. A follow-up if I may. When finalizing my later mother-in-law’s estate I filed for a Clearance Certificate. Long story short a federal auditor became involved as I had filed the final income tax return with an error. It wasn’t stock related per se. What I learned though was that the audit wouldn’t go beyond 7 years. I’ll take that at face value even if I’m doubtful of that claim.
So the question now becomes if you haven’t maintained an adjusted cost base and have held a stock longer than 7 years, can you just start the ACB 7 years in the past (using say the market price on a specific day) and go from there?
The CRA in general requires you to keep records for 6 years from the end of the last tax year they relate to. However, with respect to calculating capital gains this 6 year period isn’t based on transaction dates, but rather the tax year when a position was closed out.
For capital property the 6 year period begins after the end of a tax year where you have closed out your balance of the capital property (i.e., sold all shares of a particular company), rather than 6 years from the transaction dates.
For further information please see the following:
“The minimum retention period for the records referred to in paragraph 26 above is generally determined by the last tax year when a record may be required for purposes of the Act, and not the year when the transaction occurred and the record was created. For example, documentation relating to long-term transactions such as records supporting the acquisition and capital cost of investments and other capital property held by a person (including registered charities and registered Canadian amateur athletic associations), should be maintained until the day that is six years from the end of the last tax year in which such a transaction could enter into any calculation for income tax purposes.”
I bought company A for $5000 and it was taken over by company B in an all stock transaction and I received $4000 worth of company B stock, my question is can I claim that $1000 loss in 2020 tax year or do I have to wait until I sell company B? Thank you for your help
The tax treatment of corporate events such as an exchange, acquisitions or spin-offs can vary widely, so I would suggest checking up on this for the particular acquisition in question by looking on the company’s web site or contacting their investor relations department.
If your shares of Company A were exchanged for shares of Company B as a result of the acquisition, there are two simple tax scenarios: the shares are exchanged on a tax deferred basis or the exchange results in a deemed disposition (however, in some instances the specific tax treatment can be more complex).
If shares of Company A are exchanged for shares of Company B on a tax-deferred basis, this can be inputted into AdjustedCostBase.ca as follows:
1. Sell all shares of Company A for a total amount equal to the total ACB of Company A just prior to the acquisition. This should result in a capital gain of $0.
2. Buy the new shares of Company B for the same total amount as above.
This has the effect of shifting your ACB from Company A to Company B without any disposition occurring.
If, on the other hand, the shares of Company A are deemed to have been sold at fair market value as a result of the acquisition, this can be inputted into AdjustedCostBase.ca as follows:
1. Sell all shares of Company A for an amount equal to their fair market value at the time of the acquisition . This should result in a capital gain or loss.
2. Buy all shares of Company B for an amount equal to their fair market value at the time of the acquisition .
However, there are often further complexities that need to be taken into consideration. Here are some descriptions of some recent examples:
Hi, how would I report acb if the stock I own will become privatized? I heard they will give a cash payout so is the cash considered the capital gain?
I am trying to fill out a T5008 form for a stock I traded multiple times, and I’m a little confused which figure would be reported as my ACB. Following your calculation in the second example above (the one with multiple buys and sells), which ACB figure would I report in this case? Would the ACB be $9015.00, or $5409.00?
T5008 slips are issued by a brokerage, as opposed to being filled out by an investor.
You would receive one T5008 for every sale (though it’s possible they may be consolidated to represent multiple sales). For the May 1 sale the cost or book value (box 20) should be $2,505 ($50.10/share x 50 shares) and the proceeds of disposition (box 21) should be $6,000 (or $5,990 if the commission is factored in). For the September 25 sale the cost or book value should be $3,606 ($90.15/share x 40 shares) and the proceeds of disposition should be $3,600 (or $3,590 if the commission is factored in).
Note that the value reported by your brokerage in box 20 is often omitted, set to $0 or incorrect for a variety of reasons (see https://www.adjustedcostbase.ca/blog/can-you-rely-on-your-brokerage-for-calculating-adjusted-cost-base-and-capital-gains/).
Thank you for replying, this was a friendly merger between Alio gold and Argonaut gold, I held shares in Alio with my ACB at $14,268 but I only got back $13,000 worth of Argonaut gold shares priced on the closing date of the merger, Alio was delisted and I still hold Argonaut but I am unclear if I can claim that $1268 loss now as I plan on holding Argonaut very long term and maybe never selling , I have tried contacting investor relations but I assume because of covid I have not got a response, I tried their website but can’t see details on if it was tax deferred
The SEDAR web site is a good resource to find regulatory filings, which often contain tax treatment guidelines.
In particular, Argonaut Gold has published a Management Information Circular document on April 22, 2020 that can be accessed from here:
In particular, page 87 states the following regarding tax treatment of the exchange for Canadians:
“A Resident Holder that receives Argonaut Shares in exchange for its Alio Shares pursuant to the Arrangement will generally be eligible to treat the exchange as an automatic tax-deferred rollover under the provisions of section 85.1 of the Tax Act, with the result that such Resident Holder will be deemed to have disposed of its Alio Shares for proceeds of disposition equal to the adjusted cost base of such shares immediately before the disposition, and to have acquired the Argonaut Shares received by it pursuant to the Arrangement at a cost equal to such adjusted cost base. A Resident Holder’s cost of Argonaut Shares received pursuant to the Arrangement will be averaged with the adjusted cost base of all other Argonaut Shares held by such Resident Holder as capital property immediately prior to the Effective Time for purposes of determining the adjusted cost base of each Argonaut Share held by such Resident Holder immediately after the Effective Time.
The automatic tax-deferral treatment described above in connection with a Resident Holder’s exchange of Alio Shares for Argonaut Shares pursuant to the Arrangement will not apply where the Resident Holder has, in its income tax return for the taxation year in which the exchange takes place, included in computing its income for the year any portion of the gain or loss otherwise determined from the disposition of such exchanged Alio Shares. A Resident Holder that includes in income any portion of the gain or loss otherwise determined in respect of the disposition of its Alio Shares in exchange for Argonaut Shares pursuant to the Arrangement will be deemed to have disposed of such exchanged Alio Shares for proceeds of disposition equal to the fair market value of the Argonaut Shares received in exchange therefor, and to have acquired such Argonaut Shares at a cost equal to the fair market value of such exchanged Alio Shares. In that case, the Resident Holder will generally realize a capital gain (or capital loss) equal to the amount by which the Resident Holder’s proceeds of disposition exceed (or are less than) the aggregate of the adjusted cost base to the Resident Holder of the Alio Shares disposed of immediately before the disposition and any reasonable costs of disposition.”
This seems to suggest that you may opt to report a gain or loss on the Alio shares based on the fair market value of the Argonaut shares received. In this case your ACB of the Argonaut shares would be their fair market value at the time of the exchange.
“A capital loss can be applied against capital gains occurring in the same year”
Just a question on this, I think it may have already been asked but I’d like to re-ask in a slightly different way.
Example: 2020 tax year:
100 Shares of “ABC” bought Jan 10th, 100 shares sold Jan 20th for $100 Capital Gain. Position fully exited. ($100 Total Capital Gains on ABC for the year.)
100 Shares of “ABC” bought Feb 10th, 100 shares sold Feb 20th for $100 Capital Gain. Position fully exited. ($200 Total Capital Gains on ABC the year.)
100 Shares of “ABC” bought Mar 10th, 100 shares sold Mar 20th for $50 Capital Loss. Position fully exited. ($150 Total Capital Gains on ABC the year.)
So on 10th April, if I buy 100 Shares of “ABC”, would the Mar 10th transaction be included in this transaction’s adjusted cost base since there was a loss sold on this position within 30 days?
Would the April purchase ABC be based on that purchase only? Then if sold later on in the year, that Capital Gain or loss would be added to the March 20th total of the $150 Capital Gains for the year?)
I have a stock I like to trade a lot and wondering if one of those trades in the year is a loss, how it affects the Adjusted cost base for the tax year.
Thank-you for time, service and consideration.
The superficial loss rule would apply to the sale on March 20th provided that the repurchased shares are held until at least 30 days following March 20th. The $50 capital loss would not be allowed, but this amount can be added to the ACB of the repurchased shares. Further info on the superficial loss rule is available here:
Thank you for your time and assistance it is much appreciated
Sorry if this has been covered in the blog I haven’t read it all.
Is there any rule regarding same day trading or as long as you sell before the buy the new ACB is the buy $ amount. ( NOT asking about the 30 superficial loss rule)
Example: SELL 1000 xyz at a gain. I now own 0 shares of xyz. Later same day I BUY 1000 xyz. The value of the BUY becomes my ACB, correct?
Yes, that’s correct.
For entering number into Schedule 3, are the Proceed/ACB/Fees/Gain (Loss) the cumulative number of each of the section, or just the latest number, if there are multiple transactions?
You should input one entry into Schedule 3 for every sale.
I was told by CRA that you can add up all the transactions within one stock name that has been traded multiple times per year on the schedule 3 and enter it on a single line.
Thanks for sharing. That seems reasonable. And when submitting your tax return online, only the numbered values will be submitted (on Schedule 3, this only includes total values).
I have a question regarding precious metals. If I buy say, 100oz of silver over a period of 10 years and then sell 50 oz in one year, then not sell the other 50oz until 5 years later, must I keep a running total of all purchases vs. on the second sale, just using the price I paid for the last 50 oz? I hope this question makes sense to you! thx
Your ACB must be tracked jointly for all identical property. The per unit ACB of the remaining 50oz will be averaged together with any subsequent purchases.
Please could you help me with an ACB for Journey energy.
I held Ikuma Resouces at an ACB of $3500 and it was bought by Pieridae and i got 664 shares at a deemed cost of $2.70 each, Pieridae only wanted the gas assets not the oil so those assets were spun off into Briko Energy ( that did not and never has traded ) and i received 345 Briko at a deemed cost of $0.05 and claimed a tax loss of $1683, Briko got sold to Journey Energy and i received 125 shares at a deemed cost of $1.13 plus i got $70 cash =
Initial Ikuma ACB $3500, received $1817 worth of Pieridae/Briko so claimed $1683 tax loss (was i correct to do this?)
My ACB of $1817 for pieridae/Briko became 125 shares of journey and $70 cash plus 664 Pieridae that i still hold so what is my ACB for journey? Can i claim a tax loss or not until i no longer hold either Pieridae or Journey? Thank you for your help
The tax treatment of this exchange is fairly complex and is described in the following document found on SEDAR.com:
See the section entitled “Principal Canadian Federal Income Tax Considerations” beginning on page 47.
Based on my interpretation of this you would be deemed to incur the following transactions:
1. Return of Capital on Ikkuma shares of $17.25 (the value of the ExploreCo/Briko shares received).
2. Buy 345 shares of ExploreCo/Briko for $17.25.
3. Sell all X shares of Ikkuma for a total of $3,482.75 ($3,500.00 – $17.25). Tthis should result in a capital gain of $0.
4. Buy X shares of Ikkuma Class A for a total of $3,482.75.
5. (Assuming no Section 85 rollover) Sell all X shares of Ikkuma Class A for a total of $1,792.80 (664 shares x $2.70/share). This should result in a capital loss of $1,689.95 ($1,792.80 – $3,482.75).
6. Buy 664 shares of Pieridae for $2.70/share.
This is based on some assumptions, however, so your personal tax treatment may vary. Also I didn’t include the FMV of the ExploreCo warrants received as you didn’t mention anything about those, but that value should likely be added to the $17.25 amount and subtracted from the $3,482.75 amount.
I still don’t understand the ACB for journey
The tax treatment of the Briko/Journey exchange is described here:
beginning on page 56 under the section entitled “Canadian Federal Income Tax Considerations.”
The tax treatment is different depending on whether or not you’ve made a Section 85 election. Assuming no election was made and that your Briko shares were exchanged for $70 in cash plus 125 shares of Journey (with a FMV of $1.13/share at the time of the exchange) then the following transactions would apply:
7. Sell all shares of Briko for a total amount of $211.25 (125 shares x $1.13/share + $70.00). This will result in a capital gain.
8. Buy 125 shares of Journey for $1.13/share.
How do i record a Reverse Split?
Split transactions are covered here:
There is no difference in the handling of a reverse split vs. a split, other than the first factor of the split ratio being smaller than the second (e.g., 1-for-2).
I have a question regarding the calculation of ACB for RSU’s. Do I only enter the Net Shares issued to me to calculate the ACB or do I enter the total shares received and the total shares withheld for tax purposes?
Thanks so much!
I have a question regarding the proper way to add commissions when buying and selling. I have been using the gross amount from the the trade confirmation and then adding the commission to the commission box.
For example if I purchased $5,000 of a fund which is the gross amount on the confirmation. Then I would add the $6.95 commission when adding a new transaction in the acb calculation. This would give a total of $5,006.95.
Can you confirm this is the correct way as I have seen other tutorials where the commission is not a seperate entry.
For a purchase with a gross total amount of $5,000 and a commission of $6.95, you should input the total amount as $5,000 and the commission amount as $6.95 on AdjustedCostBase.ca.
You may also use a total amount of $5,006.95 and a commission amount of $0 (the result will be the same).
Thank you for all of your time and knowledge.
If you purchase $100,000.00 in a mutual fund in a non registered account, and then receive $12,000.00 throughout the year purely from a return of capital distribution at $1,000 per month which you reinvest every month, is your ACB $112,000 ?
If the current market value is $106,000.00, and you sell, does this represent a capital loss ?
Sorry, not sure of the effect of the ROC distribution.
ROC is a payment you have received that is not currently taxable, but which reduces your ACB by the amount of the ROC. This has the effect of increasing your future capital gain (or reducing your future capital loss). It is a form of deferred capital gain. The only tax effect is that you must REDUCE your ACB of the mutual fund by the amount of the ROC. Therefore your ACB would fall by $1,000 a month. When you reinvest the money, your ACB increases by the amount of the reinvestment. Therefore, in your example, the ACB remains at $100,000 because the ROC is the same amount as the reinvestment. If you then sell at $106,000, you have a capital gain of $6,000. If you think about it, this makes sense because if you look at your cash outlay/inflow, you have invested $100,000, received/reinvested the same amount, so that has a nil impact, and then you will get $106,000 when you sell, so have made $6,000.
If I have an ETF in my personal non reg and the same ETF in my corporate account, do I need to track the acb for each ETF seperately? Or would the acb need to be tracked as one?
Your ACB should be tracked separately between a personal non-registered account and a corporate account. This can be done using separate portfolios on AdjustedCostBase.ca. Note, however, that purchases in one account may trigger the superficial loss rule for a sale in the other account where the corporation is controlled by you or your spouse/common-law partner.
My wife recently passed away and the ETF holdings in her non-registered margin account have now been transferred “in-kind” to mine. The brokerage charged a $200 “Estate Fee” to complete this transfer. Can I increase the ACB of those ETFs due to this expense? If so how should it be split?
This fee likely cannot be applied to your adjusted cost base as it is not a fee corresponding to the acquisition of specific securities. It’s possible that it could be deductible on line 22100 of your tax return:
Thank you – that makes sense.