# Tracking ACB for ETF in taxable account



## james4beach (Nov 15, 2012)

iShares just posted: Final 2012 Distribution Characteristics (link to PDF)

I noticed that Scotia iTrade is tracking the ACB for my ETFs, and when I reverse engineered how they got their numbers I saw it was different than how I used to track them. I have some ACB confusion. Basic idea is that reinvested distributions should be added to ACB, and return of capital should be subtracted from ACB.

Question is what is the correct way to implement this in practice and where should the numbers be sourced from. For examples the iShares web pages for each ETF distributions shows the annual amount (return of capital) but that's a sum of all months. If you buy/sell shares in between months, I don't think you can use the web page's "annual" ROC because it lumps all months together. Also the numbers on the distribution web pages don't always match what's in the Final Distribution Characteristics PDF document that iShares releases. I also believe you should totally ignore the 'capital gains' column on the web site, as it's not the correct number to use for ACB adjustment.

Here is the procedure I'm currently using. Does this look correct to you?

1. Use the Final 2012 Distribution Characteristics (PDF) and not the iShares web page for distributions
2. Any buy/sell trade obviously affects your ACB. Track them sequentially by date
3. From the PDF, look at each monthly distribution including in between your trades. Every month has ROC.
( This starts to become a lot of record keeping work. You need an ACB adjustment every month -- not just at year-end! )
4. Each month on the ex div date, subtract the ROC from your ACB.
5. In the final month, add the reinvested distribution to the ACB.

For example with XDV, from that 2012 document I linked above, every month's return of capital (0.00083, 0.00083, 0.00084, 0.00087) must be subtracted from your ACB. If you make any trades within the year you can't lump the ROC's together. In December, the reinvested distribution of 0.65030 is then added to the ACB.

This is definitely a lot of data entry work, even if you're using software to track it. Is this really how it must be done? Another reason I don't like return of capital.


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## andrewf (Mar 1, 2010)

I was trying to get tax treatment of distributions by month from iShares for an old claymore fund. They kept on directing me to the annual totals. I figured it was 'safe' to just use the % breakdown on each distribution. I set up a spreadsheet to do this, where I can just plug in the % ROC at the end of the year.


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## james4beach (Nov 15, 2012)

I think your estimate may be fine. The monthly ROC's look pretty evenly distributed, from what I can see.

One thing I keep wondering is how the heck is CRA tracking and calculating all this? It could have a big effect on the tax situation, for an ETF held for years. The reinvested distribution certainly would. And imagine all the people forgetting to add the reinvested distribution to the ACB, thus overpaying capital gains... ouch.


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## Sampson (Apr 3, 2009)

james4beach said:


> One thing I keep wondering is how the heck is CRA tracking and calculating all this?


They don't. It's your obligation to do so and report properly.

I've never trusted the bank issued statements, this is something best done by yourself. I don't know if anyone has experience dealing with reporting cap gains/losses under audit when a large portion of invested funds have ROC component, but I am guessing that CRA allows some 'flexibility' - just as they do with reporting foreign dollar transactions. You could pick annual rates, daily rates, spot rates etc, I always use the rate beneficial to me.


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## james4beach (Nov 15, 2012)

Yes I don't trust the broker's ACB tracking either because one day they may hit a button and wipe out that number. This has to be tracked yourself.

Clearly it's a lot of work! The "evidence" I plan on keeping are those iShares final year end PDF documents. I'm keeping those files, and if CRA wants to audit the whole ROC & reinvested distribution trail, I suppose they can with those PDF files.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> One thing I keep wondering is how the heck is CRA tracking and calculating all this?





Sampson said:


> They don't. It's your obligation to do so and report properly...


I'm not sure ... I suspect there's spot checks in place. 

When I first bought trusts, I recall only getting a list of of the cash payments and a long warning to make sure this info kept and to check the source company website to ensure it was tracked appropriately. Now I get a list of the payments that explicitly states the RoC by investment during the year.

It wouldn't be hard for the broker to pass on to CRA in CSV format this breakdown which with the schedule 3 "year of acquisition" would provide a partial spot check.




james4beach said:


> ... It could have a big effect on the tax situation, for an ETF held for years. The reinvested distribution certainly would.


Maybe ... though based on the comments here as well as conversations I've had, adding in the re-invested distribution to the ACB seems to be far more widely known than the "if the ACB is negative, report the RoC as a capital gain each tax year until the ACB becomes positive". Or the other big one is "what do you meant a MF, ETF or index fund could have RoC?".




james4beach said:


> ... Clearly it's a lot of work!


I guess it's in the eye of the behold. In a typical year, I'm reconciling monthly anyway so it's an extra five or six entries to the spreadsheet plus the end of the year one. I'm excluding the buy/sells because there is no way to avoid those.


Cheers


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## james4beach (Nov 15, 2012)

And once your portfolio is pretty stable, assuming you're making few transactions, you can then reduce the work to a year end record keeping (assuming the portfolio doesn't change inside the year).

I'm ending up with a lot of work in a portfolio where I use XUT (no commissions with iTrade) as a kind of cash buffer. So I keep buying shares during the year, and the ACB is getting messy.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> And once your portfolio is pretty stable, assuming you're making few transactions, you can then reduce the work to a year end record keeping (assuming the portfolio doesn't change inside the year).


Pretty much .... as long as one is confident the ACB won't accidentally slide into a negative position triggering yearly capital gains to report.




james4beach said:


> I'm ending up with a lot of work in a portfolio where I use XUT (no commissions with iTrade) as a kind of cash buffer. So I keep buying shares during the year, and the ACB is getting messy.


That would do it ... my condolences. 


Cheers


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