To calculate a capital gain or loss, you must know your investment’s ACB. Here’s the formula for adjusted cost base.
The adjusted cost base (ACB) of an investment is the cost used to calculate your capital gain or capital loss for tax purposes. ACB represents the total cost of the security, including commissions and certain other costs. For example, if you buy 10 shares of a $20 stock for $200 and pay a $19 commission, your ACB is $219. Note, however, that for real estate such as secondary residences or rental income properties, the ACB does not include current expenses (e.g., maintenance and repair costs).
ACB = Investment-related costs + cost of the investment
Calculating your adjusted cost base is more complicated for shares acquired through dividend reinvestment plans (DRIPs) or corporate actions like stock splits. These occurrences change your ACB for a stock, so you’ll need to keep track of the timing, the number of shares and the value of each transaction.
Example: “Because the Canada Revenue Agency requires taxpayers to report in Canadian dollars, investors who trade in U.S. or other foreign-denominated securities should keep track of their adjusted cost base in Canadian dollars on the date of each transaction.”
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