CRA Adjusted Cost Base Calculation

ACB Formula:

\[ ACB = \frac{\text{Total Cost of Units} + \text{Acquisition Costs}}{\text{Total Units}} \]

ACB ($/unit):

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1. What is Adjusted Cost Base (ACB)?

The Adjusted Cost Base (ACB) is the average cost of all units of an investment owned by a taxpayer, used by the Canada Revenue Agency (CRA) to calculate capital gains or losses when the investment is sold.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

\[ ACB = \frac{\text{Total Cost of Units} + \text{Acquisition Costs}}{\text{Total Units}} \]

Where:

Total Cost of Units — The total amount paid for all investment units
Acquisition Costs — Additional costs such as commissions, fees, and expenses related to purchasing the investment
Total Units — The total number of investment units owned

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

3. Importance of ACB Calculation

Details: Accurate ACB calculation is essential for proper tax reporting. It determines the capital gain (selling price minus ACB) or capital loss (ACB minus selling price) for tax purposes. Incorrect ACB calculation can lead to incorrect tax filings and potential penalties.

4. Using the Calculator

Tips: Enter the total cost of all units in dollars, all acquisition costs in dollars, and the total number of units. All values must be positive numbers, with total units greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What costs are included in acquisition costs?
A: Acquisition costs include brokerage commissions, legal fees, accounting fees, and other expenses directly related to purchasing the investment.

Q2: How does ACB affect capital gains tax?
A: A higher ACB reduces your capital gain (or increases your capital loss), which can lower your tax liability when you sell the investment.

Q3: Do I need to track ACB for each purchase?
A: Yes, the CRA requires you to track the ACB for identical properties, which means calculating the average cost after each purchase.

Q4: What happens when I sell only some of my units?
A: You use the ACB to calculate the cost of the units sold, and the remaining units continue to have the same ACB until another purchase is made.

Q5: Are there special rules for mutual funds?
A: Mutual funds often have reinvested distributions that increase your ACB. You must include these reinvested amounts in your ACB calculation.