1. What is Adjusted Cost Basis (ACB)?

Adjusted Cost Basis (ACB) is a tax calculation method used in Canada to determine the average cost per unit of an investment. It's essential for calculating capital gains or losses when selling investments for tax purposes.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• \( \text{Total cost of units} \) — Total amount paid for all investment units ($)
• \( \text{Total units} \) — Total number of investment units purchased

Explanation: The ACB represents the average cost per unit of your investment, which is used to determine capital gains or losses when you sell units.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for Canadian tax reporting. It determines your capital gains tax liability when disposing of investments and helps avoid overpaying taxes.

4. Using the Calculator

Tips: Enter the total cost of all investment units in Canadian dollars and the total number of units purchased. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is ACB important for Canadian investors?
A: ACB is used to calculate capital gains or losses for tax purposes when selling investments. The Canada Revenue Agency (CRA) requires accurate ACB calculations.

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

Q3: How does ACB affect capital gains calculation?
A: Capital gain/loss = Selling price - (ACB × number of units sold). Only 50% of capital gains are taxable in Canada.

Q4: Does ACB change with additional purchases?
A: Yes, ACB is recalculated each time you purchase additional units, creating a new weighted average cost.

Q5: Are there special rules for different investment types?
A: Yes, different rules may apply for mutual funds, stocks, ETFs, and other securities. Consult a tax professional for complex situations.