1. What is Adjusted Cost Base (ACB)?

The Adjusted Cost Base (ACB) is a tax term used in Canada to determine the cost of an investment for tax purposes. It represents the average cost per share of a security, including all acquisition costs and fees.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• \( Total\ Cost \) — Total purchase price of the shares
• \( Acquisition\ Fees \) — All transaction fees and commissions
• \( Shares \) — Number of shares purchased

Explanation: The ACB calculation helps determine the capital gain or loss when you sell investments, which is essential for accurate tax reporting in Canada.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for Canadian investors to properly calculate capital gains tax, avoid overpaying taxes, and maintain compliant tax records with the Canada Revenue Agency (CRA).

4. Using the Calculator

Tips: Enter the total cost of shares in currency, all acquisition fees in currency, and the number of shares purchased. All values must be valid (costs ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why is ACB important for Canadian investors?
A: ACB determines the capital gain or loss when selling investments, which directly affects your tax liability with the CRA.

Q2: What costs are included in ACB?
A: ACB includes purchase price, commissions, legal fees, and other acquisition costs directly related to purchasing the investment.

Q3: How does ACB affect capital gains tax?
A: Capital gain = Selling price - ACB. Only 50% of capital gains are taxable in Canada, making accurate ACB calculation essential.

Q4: Do I need to track ACB for all investments?
A: Yes, for all taxable investment accounts. TFSA and RRSP accounts have different tax treatment and don't require ACB tracking for withdrawals.

Q5: How often should I update my ACB?
A: Update ACB after every purchase to maintain accurate records. Many Canadian investors use portfolio tracking software to automate this process.