{"id":4,"date":"2014-05-02T22:44:14","date_gmt":"2014-05-02T22:44:14","guid":{"rendered":"http:\/\/www.adjustedcostbase.ca\/blog\/?p=4"},"modified":"2015-01-05T08:43:00","modified_gmt":"2015-01-05T13:43:00","slug":"can-my-adjusted-cost-base-be-negative","status":"publish","type":"post","link":"https:\/\/www.adjustedcostbase.ca\/blog\/can-my-adjusted-cost-base-be-negative\/","title":{"rendered":"Can My Adjusted Cost Base be Negative?"},"content":{"rendered":"<p>Although rare, the situation can occur where you receive a ROC (return of capital) distribution that exceeds your adjusted cost base.\u00a0 Since ROC normally has the affect of reducing ACB, the question arises: should your ACB be reduced to a negative value in such a case?<\/p>\n<p>The short answer is no, your ACB cannot go below zero, according to Canada Revenue Agency rules.<\/p>\n<p>In such a case where ROC exceeds adjusted cost base, the ACB is reduced to $0.\u00a0 Furthermore, the amount by which the ROC exceeds the ACB is immediately taxable as a capital gain in the year of the distribution.\u00a0 Once the ACB has been reduced to $0, any further ROC distributions are entirely taxable as capital gains immediately.<\/p>\n<p>The <a title=\"AdjustedCostBase.ca\" href=\"http:\/\/www.AdjustedCostBase.ca\/\" target=\"_blank\">AdjustedCostBase.ca<\/a> calculator takes this rule into consideration.\u00a0 The following example demonstrates this:<\/p>\n<div id=\"attachment_5\" style=\"width: 1223px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital.png\" data-rel=\"lightbox-image-0\" data-rl_title=\"\" data-rl_caption=\"\" title=\"\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-5\" class=\"wp-image-5 size-full\" src=\"https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital.png\" alt=\"acb_reduced_to_zero_return_of_capital\" width=\"1213\" height=\"272\" srcset=\"https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital.png 1213w, https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital-300x67.png 300w, https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital-1024x229.png 1024w, https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/2014\/05\/acb_reduced_to_zero_return_of_capital-624x139.png 624w\" sizes=\"auto, (max-width: 1213px) 100vw, 1213px\" \/><\/a><p id=\"caption-attachment-5\" class=\"wp-caption-text\">Adjusted cost base is reduced to zero, resulting in all further return of capital distributions to be immediately taxable as capital gains.<\/p><\/div>\n<p>The transactions are as follows:<\/p>\n<ol>\n<li>The first transaction in April is a purchase of $1,000 of the security with a $10 commission, resulting in an initial ACB of $1,010.<\/li>\n<li>Next, in May, a $500 ROC distribution occurs, reducing the ACB to $510.<\/li>\n<li>Then in June, a $600 ROC distribution occurs.\u00a0 In this case, the ACB is reduced to $0 since $600 exceeds the ACB of $510.\u00a0 Furthermore, a capital gain of $90 ($600 less $510) is immediately applicable and must be reported for the 2014 tax year.<\/li>\n<li>Finally in July, a further ROC distribution occurs.\u00a0 Since the ACB has already been reduced to zero, the entire distribution of $100 is taxable as a capital gain in 2014.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Although rare, the situation can occur where you receive a ROC (return of capital) distribution that exceeds your adjusted cost base.\u00a0 Since ROC normally has the affect of reducing ACB, the question arises: should your ACB be reduced to a negative value in such a case? The short answer is no, your ACB cannot go [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,9],"tags":[],"class_list":["post-4","post","type-post","status-publish","format-standard","hentry","category-advanced-acb-topics","category-return-of-capital"],"_links":{"self":[{"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/posts\/4","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/comments?post=4"}],"version-history":[{"count":12,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/posts\/4\/revisions"}],"predecessor-version":[{"id":712,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/posts\/4\/revisions\/712"}],"wp:attachment":[{"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/media?parent=4"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/categories?post=4"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.adjustedcostbase.ca\/blog\/wp-json\/wp\/v2\/tags?post=4"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}