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Calculating Your Adjusted Cost Base (ACB)

How to calculate your adjusted cost base (ACB). There was a comment left on the “How Capital Gains Tax Works” article about how to calculate your capital gains when you make multiple stock purchases at different prices over the years.

The key is to go back into your records and find the transaction details to do an adjusted cost base calculation. After figuring out the ACB, calculating capital gains are pretty straight forward from there.

For example:

  • May 2006: bought 100 shares of xyz @ $50
  • Jan 2007: bought 200 shares of xyz @ $60
  • Dec 2007: sold 100 shares of xyz @ $75
  • Assume trade commissions are $10 each (see the discount brokerage comparison)

What is your capital gain?

First you need to figure out your average buy price or Adjusted Cost Base (ACB) or Cost Basis of the stock.

  • ACB = (Total Cost + Commissions)/Total Number of Shares Owned
  • ACB = [(100 x $50) + (200 x $60) + 20]/ 300
  • ACB = $56.74 / share

Next we’ll calculate the Capital Gain (loss) of the transaction:

  • Capital Gain (loss) = (Sell Price – ACB) x number of shares sold – commissions
  • Capital Gain = ($75 – $56.74) x 100 – $10 = $1,816
  • Capital Gains Tax = Capital Gains x 50% x Marginal Rate

A fairly straight forward but necessary calculation if you trade stocks in your non-registered account. I think the easiest way to do these calculations is either through a program like MS Money, Quicken, or through a simple spreadsheet to track your trades.

If you have a portfolio tracking spreadsheet that you would like to share, please contact me.

Note that the calculations and explanation above is done by an amateur. Please do your own due diligence or contact a tax professional for your own situation.

photo credit: tompagenet

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24 Comments

  1. Victor on April 16, 2008 at 10:39 am

    If you take a look at historical gas prices in Toronto (http://www.torontogasprices.com/retail_price_chart.aspx) over the last 6 years compared to the price of crude, you will notice a recent divergence in the two trends. To me, this indicates that we can expect a large adjustment jump in the price at the pump. Perhaps we are seeing this already at $1.17/L today. I have read that we can expect to see $1.50/L by summer.

    Even though I consider myself an environmentalist, I have no illusions that most people feel the way I do. I believe people will cut out a lot of luxuries from their lives before reducing the amount they drive. That being said, my question to FT and MDJ readers is what investment opportunities does this offer us? Is investing in oil and gas companies the way to go? Does anyone else benefit directly from rising gas prices?

    Thank you!

    • FrugalTrader on April 16, 2008 at 11:57 am

      I always hold a portion of my portfolio in energy. Right now, a big chunk of that allocation is in Canadian Oil Sands. (COS.UN).

  2. Hannah on April 16, 2008 at 11:00 am

    Great post, this is something people need to know how to do! Great timing, too, as I just finished filing my taxes just this morning (I was waiting on a T4 that didn’t get sent to arrive).

  3. Geoff on April 16, 2008 at 11:48 am

    Victor,

    The oil trusts are an interesting play in the stock market. Check out Penn West.

    Penn West delivers 34 cents *every month* for each share you own. You might be able to offset your increased pump prices with this baby. Plus as oil rises so will the price of the share. For me, the *monthly* dividends sold me on it.

  4. Qubikal on April 16, 2008 at 1:13 pm

    Thanks for posting on the topic – i was googling on how to calculate ACB, while on the side made my daily visit to the site and killed 2 birds with one visit…

    on a side note – can someone help me on determining my ACB in the event of a spin-off, in the format of a dividend? For example, owning Altria (MO)- spun off Philip Morris International (PM), issuing 1 share as dividend for each share of Altria owned.

    Let’s say for example, i purchased 100 shares of (MO) pre-split at $70. What’s my ACB of the MO shares and the PM shares after spin off?

    Thanks!

  5. JR on April 16, 2008 at 6:18 pm

    Geoff said

    quote .. “Victor,

    The oil trusts are an interesting play in the stock market. Check out Penn West.

    Penn West delivers 34 cents *every month* for each share you own. You might be able to offset your increased pump prices with this baby. Plus as oil rises so will the price of the share. For me, the *monthly* dividends sold me on it.”

    Geoff, I’d be interested to know how you would protect the investment if the stock price goes down the way it did earlier this year at the beginning of – to the middle of February, or is that of no consequence since PWE keeps paying the same monthly distribution?

  6. Geoff on April 16, 2008 at 7:23 pm

    JR,

    You bring up a good point. Check out one oil trust, Penn West:

    http://tools.trustweb.ca/acb_001/tools/distributions/?fundid=8

    You’ll notice consistent distributions.

    The way I see it – I see cheap oil as unsustainable. I’m betting against cheap oil in the long run. And under those circumstances what matters in the long run is how much oil you control. “Dollar cost averaging” works for oil trust shares in the same way it works for any other index stock.

    But thats just my bet – we’ll see how it works out ;)

  7. JR on April 16, 2008 at 8:12 pm

    Geoff, ermmm, OK, two things on trust units, since in PWE or PWT.UN case I looked at the charts over the past twelve months and that concerned me.

    1) they do swing around, and I suppose cost averaging would be one good way to get around any minor swings, that instead of purchasing say 1000 shares all at once, it could be done in several stages over days, weeks months or years to the point of reinvesting the dividends, that is if PWE was one of the preferred choices.

    2) the other concern I have is the distributions, and I know there are no certainties in life, I have seen distributions on some trust units lowered, even vanished.

    But hey, if trust units give the investor the comfort level they need on monthly distributions and can handle any downward swings, then who am I to knock it. My question was what-if the PWE stock dropped below the $30 mark and stayed there

  8. Jared on April 17, 2008 at 11:51 am

    I have a question not directly related to this topic, but that someone here can probably answer.

    My question is if you borrow money for investing buy a stock and then sell the stock. How much if any of the money could be taken out without changing the deductibility of the loan..

    So an easy example:
    10K borrowed…
    Buy 10 shares for 1K each.
    Sell 10 shares for 1.5K each 6 months later..

    Can the 5K increase be taken out of the investing account, as long as the 10K is invested in something else without effecting deductibility of the loan?

  9. pension on April 17, 2008 at 2:41 pm

    An interesting and revealing article – thanks for shifting my focus!

  10. paulette on April 19, 2008 at 10:50 pm

    Thanks for the information.:)

  11. DG on May 13, 2008 at 11:35 pm

    Thanks for the info, but I have a question:

    What is the ACB *after* you’ve sold some of the shares?

    Thanks,
    Dan.

  12. FrugalTrader on May 14, 2008 at 12:37 am

    DG, here is a table that will step you through the process:
    http://www.fiscalagents.com/newsletter/4abcacb.shtml

  13. […] back to the share holders themselves. The resultant distribution is non taxable but decreases the adjusted cost base of the original purchase (tax deferral). When it comes time to sell in the future, providing that […]

  14. […] above, you get to claim the FULL amount invested against your income. However, when you sell, your adjusted cost base (ACB) is set to $0, ie. whatever you sell for is your […]

  15. […] divide that answer by the following: Three times the fair market value (3 x $100,000) less the adjusted cost base (ACB) of the shares […]

  16. […] with what occurred next. When Mr. Lipson sold shares to Ms. Lipson, the ITA deems the sale to be at adjusted cost base and not fair market value (since they are spouses and eligible for tax deferral on a rollover […]

  17. amit on March 12, 2009 at 5:25 pm

    Hello FrugalTrader,

    How do the ACB calculations change when the stock is split? What about Phantom Distributions? Few of my iShares ETFs distributed some phantom distributions earlier this year (Feb 2009) and I am not sure how does my ACB calculation would change due to these. I couldn’t find much information on this except for a website for a company called ACBTracking Inc. that charges $85/- for 10 calculations. Since, I am an individual with just 7 ETFs with no sales, I find it pretty costly to pay $85/- to just calculate my ACB if it’s easier for me to calculate it myself. Hence the questions.

    Thanks,
    – Amit.

  18. Justin on April 5, 2009 at 3:14 am

    If I buy and sell one US stock for many years (many times each year) and do not declare tax losses each year because each time I sell I bought some back within 30 days (the superficial loss rule would not allow it), finally in 2008 I sell all the shares and decide to make a tax claim. What would be the ACB?

    I see three options:
    1) convert each transaction into CAD using the spot exchange rate.
    then compute ACB from it.

    2) compute the ACB for each year and convert to CAD using the CRA averaged US$ rate for that year

    3) compute the ACB in US$ for all the previous years and you get a
    capital gain or loss in US$. Then convert it into CAD using the CRA
    averaged US$ rate for 2008 (or the rate on the day it is finally sold).

    1) would be the most accurate. But too complicated if the number of trades is huge.
    2) seems OK.
    3) I am not sure.

    Can anyone comment? Thanks
    Justin

  19. Tom on April 6, 2009 at 3:38 pm

    Buy & Sell Fees.

    Hey Guys,

    I am on a fee base structure @ CIBC – so each year a pay about 1.25% of my portfolio value. This basically includes a bunch of trades and etc.. Anyways,
    my question is: How do you write off the fee on a tax form? Let’s say it cost me $X dollars in trade fees which form do I declare that on? Any tax experts and/or anyone in a similar situation? Any help would be greaaat!

  20. Terry on November 6, 2009 at 12:15 pm

    Hello
    How do dividends that are reinvested effect the acb calculation?

    ACB = (Total Cost + Commissions)/Total Number of Shares Owned

    do they simply increase the TNSO (total number of shares owned) ??

  21. […] of these conditions allow you to claim a capital loss. If the shares ever regain value again, the adjusted cost base (ACB) is $0 and you will have a capital gain when you actually sell […]

  22. Financial Cents on January 20, 2010 at 10:29 pm

    Hey Frugal,

    How do you calculate ACB for your rental property? Is this the same as FMV (fair market value) – at time of starting to rent the unit?

    Any links to help on this would be appreciated!

  23. Trevor on February 1, 2010 at 4:02 pm

    When calculating the ACB with exchange rates, USD to CAD. I assume we need to keep track of this too, since you could have bought at $1.30 to USD and later sold or added more at around 1 to 1. Also if you purchase on margin in USD and repay at a better exchange rate I guess we would have to calculate on the exchange rate when the money was converted to USD and not when the shares were purchased?

  24. […] you bought the same stock at different prices, you need the transaction records to calculate your adjusted cost base. This is particularly important if you are enrolled in a dividend reinvestment […]

  25. lois on April 16, 2010 at 7:50 pm

    When selling a rental property, are there any other expenses other than capital purchases, purchase price and selling expenses that affect the ACB? I’ve never declared any CCA.

  26. Poor White Trash on January 13, 2012 at 2:27 am

    My discount brokerage sends me a letter every year that appears to track my capital gains from the previous year. It’s not a real “T4” looking document but typically i claim 1/2 their total as income on my tax forms. Their dividend and income summary is much more official looking and is sent seperatly.

    There isnt much detail on their gains summary, Is it possible they choose their own way of calculating my ACB or is their napkin total good enough for the taxman.

  27. Lost in Space on December 15, 2015 at 11:58 am

    http://www.adjustedcostbase.ca does all the math for you and when your done you can export it to an excel spread sheet

  28. FT on January 7, 2018 at 10:51 am

    +1 for adjustedcostbase.ca, used it this year and it works!

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