# Help understanding Summary of Trust income



## longinvest (Sep 12, 2012)

*ETF taxation: Adjusting ACB for silently reinvested distributions?*

Hi,

Should I adjust the ACB of my investment in VEF for its "silently" reinvested distribution?

Here is what I mean. In 2012, VEF distributed $0.63242 per share. Yet, it reported $0.07280 capital gains, $0.02503 return of capital, $0.71439 foreign income, and $0.10700 foreign tax paid. (source: https://www.vanguardcanada.ca/individual/etfs/etf-distribution-history.htm?portId=9555 )

Total reported: $0.07280 + $0.02503 + $0.71439 - $0.10700 = $0.70522
Excess over distribution: $0.70522 - $0.63242 = $0.07280

1- Am I right assuming that VEF reinvested $0.07280 in 2012?

2- Should I add $0.07280 to my ACB for VEF in addition to removing $0.02503 for return of capital?

3- If so, why doesn't Vanguard report this reinvested distribution? Does it have to be this complicated?

Thanks for any help you might provide.

longinvest

(Edited to simplify!).


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## longinvest (Sep 12, 2012)

Bump!


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## Eclectic12 (Oct 20, 2010)

longinvest said:


> Should I adjust the ACB of my investment in VEF for its "silently" reinvested distribution?


If VEF paid a distribution that was re-invested instead of cash, then yes as per the following TaxTips.ca link:



> The distributions that are declared may not necessarily be paid to shareholders. Part or all of the distribution may be reinvested, not paid in cash. The amount of the reinvested distribution is added by the shareholder to the adjusted cost base of the shares in the ETF.


http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm

Otherwise you will be paying more taxes than you should.
http://canadianfinancialdiy.blogspot.ca/2007/03/adjusted-cost-base-for-etfs-and-mutual.html




longinvest said:


> 1- Am I right assuming that VEF reinvested $0.07280 in 2012?


I'd call them to ask for an explanation. 

The ETFs I've used report this type of non-cash reinvested distribution under the column "Reinvested distribution per unit" - where this is a footnote that explicitly says to add this amount to the ACB.




longinvest said:


> 2- Should I add $0.07280 to my ACB for VEF in addition to removing $0.02503 for return of capital?


If Vanguard confirms this is a non-cash reinvested distribution - then yes. 





longinvest said:


> 3- If so, why doesn't Vanguard report this reinvested distribution? Does it have to be this complicated?


Another question for Vanguard, though it could be a mistake on their part you've found.

As I say - for my ETF, the first table lists the amount and if one is thorough enough to read the footnotes for that column, the note clearly says it is a reinvested distribution that has to be added to the ACB.


Cheers


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## longinvest (Sep 12, 2012)

Eclectic12,



Eclectic12 said:


> If VEF paid a distribution that was re-invested instead of cash, then yes as per the following TaxTips.ca link:
> 
> http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm
> 
> ...


Thanks for the links. They were really helpful.



Eclectic12 said:


> I'd call them to ask for an explanation.


I'll try that.

longinvest


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## longinvest (Sep 12, 2012)

For reference, if anybody else is interested, the effect of reinvested distributions on the ACB is illustrated in:

http://ca.ishares.com/misc/faq.htm

Look for the answer to: *Q. What is the difference between cash distributions and reinvested distributions?*

I got this from Eclectic12's second link.

longinvest


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## longinvest (Sep 12, 2012)

Finally found my answer... CanadianCouchPotato talked about MRFPs, today. That got me the idea to look into VEF's 2012 MRFP.

There it is, in a footnote on page 3:

_Distributions from income were paid in cash and *distributions from capital gains were reinvested* in additional units of the ETF. Actual distributions may vary slightly owing to rounding._

That makes sense (it matches my calculations).

longinvest


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## Eclectic12 (Oct 20, 2010)

Here is another link that I like as it provides a chart comparing the ACB calculation for a mutual fund (which most seem to be more familiar with) and an ETF for the same amounts (i.e. same buy/sell, same distribution, same RoC etc.).

If one compares the ACB with the re-invested distribution versus without it (i.e. whomever does not know about it or has forgotten to do it), it becomes clear that the ACB is lower than it should be, making the capital gains higher than it should be so that more CG tax is paid.

http://howtoinvestonline.blogspot.ca/2009/01/etfs-and-mutual-funds-calculating.html


Cheers


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