1. What Is Adjusted Cost Base?

The Adjusted Cost Base (ACB) is a tax term used in Canada to determine the cost of an investment for capital gains tax purposes. It represents the average cost per share when you purchase the same stock at different times and prices.

2. How Does The Calculator Work?

The calculator uses the ACB formula:

Where:

• \( Total\ Cost \) — Total purchase price of all shares (CAD)
• \( Commissions \) — Total brokerage commissions paid (CAD)
• \( Total\ Shares \) — Total number of shares purchased

Explanation: The formula calculates the average cost per share, including all acquisition costs, which is essential for accurate capital gains reporting to the Canada Revenue Agency (CRA).

3. Importance Of ACB Calculation

Details: Accurate ACB calculation is crucial for Canadian investors to correctly report capital gains or losses on their tax returns. Using incorrect ACB can lead to overpaying or underpaying taxes, potentially resulting in penalties from the CRA.

4. Using The Calculator

Tips: Enter total cost in CAD, commissions in CAD, and total shares as a whole number. Ensure all values are positive, with total shares being at least 1.

5. Frequently Asked Questions (FAQ)

Q1: Why include commissions in ACB calculation?
A: The CRA requires including all costs of acquisition, including brokerage commissions, to determine the true cost basis of your investment.

Q2: How does ACB affect capital gains tax?
A: Capital gain = Selling price - ACB. A higher ACB means lower capital gains and less tax payable.

Q3: What if I buy shares at different times?
A: You must calculate the average ACB across all purchases of the same security. Each new purchase adjusts the overall ACB.

Q4: Are dividends included in ACB?
A: No, dividends are investment income and do not affect ACB. Only capital transactions (purchases, sales) affect ACB.

Q5: How do stock splits affect ACB?
A: Stock splits adjust your share count and ACB proportionally. For example, in a 2-for-1 split, your shares double and ACB halves.