1. What Is Adjusted Cost Base?

The Adjusted Cost Base (ACB) is a tax term used in Canada to determine the average cost of shares or units in an investment. It includes the original purchase price plus any commissions or fees paid to acquire the investment.

2. How Does The Calculator Work?

The calculator uses the ACB formula:

Where:

• \( \text{Cost of Shares} \) — Total purchase price of the shares
• \( \text{Fees} \) — Any commissions, brokerage fees, or acquisition costs
• \( \text{Number of Shares} \) — Total number of shares purchased

Explanation: The ACB represents the average cost per share when you purchase multiple shares at different times or prices, which is essential for calculating capital gains or losses for tax purposes.

3. Importance Of ACB Calculation

Details: Accurate ACB calculation is crucial for Canadian investors to properly report capital gains and losses on their tax returns. Using the correct ACB ensures you pay the appropriate amount of tax when you sell investments.

4. Using The Calculator

Tips: Enter the total cost of shares in dollars, any fees paid in dollars, and the number of shares purchased. All values must be valid (cost ≥ 0, fees ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why is ACB important for Canadian investors?
A: ACB determines your capital gain or loss when selling investments. A higher ACB means lower capital gains and less tax payable.

Q2: What costs are included in ACB?
A: Include purchase price, commissions, legal fees, accounting fees, and any other costs directly related to acquiring the investment.

Q3: How does ACB work with multiple purchases?
A: When you make multiple purchases, you calculate the average ACB by adding all costs and dividing by total shares owned.

Q4: Are reinvested distributions included in ACB?
A: Yes, reinvested dividends or capital gains distributions increase your ACB, which reduces future capital gains when you sell.

Q5: What happens if I don't track ACB properly?
A: You may overpay taxes by reporting higher capital gains than actual, or face penalties from CRA for incorrect tax reporting.