What is an adjusted cost base (ACB)?

To calculate a capital gain or loss, you must know your investment’s ACB. Here’s the formula for adjusted cost base.

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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