# Stock splits and ACB



## Kaitlyn (May 13, 2011)

Say you buy 100 shares of XYZ @ $78

Then you buy 100 more when it hits $110

Then when it dropped to 100, it had a 2:1 split.

You then picked 100 more up at $55.

How do you calculate the ACB now? Prices have changed AND you "magically" have double your # of shares...

Thanks!


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## travelgeek (Nov 29, 2009)

ACB before split = $94 ($18800/200)

the $100 price at the time of split is irrelevant.

ACB after split = $47 ($18800/400)

ACB after pickup the last 100 shares = $48.60 (($18800 + $5500)/500)


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## fersure (Apr 19, 2009)

travelgeek beat me to it! At least I got the same answer.

You'd also need to keep track of your trading costs and any return of capital (from you tax receipts, if applicable) to develop an accurate ACB.


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## Eclectic12 (Oct 20, 2010)

Kaitlyn said:


> Say you buy 100 shares of XYZ @ $78
> 
> Then you buy 100 more when it hits $110
> 
> ...


Assuming the investment does not pay Return of Capital (RoC) and that there are no commission costs, the other ACB calculations posted are correct. 

Most shares do not pay RoC but other investments such as most trusts and some ETFs or Mutual Funds or split shares do pay RoC.

Here are a couple of links with more information:
http://www.milliondollarjourney.com/calculating-your-adjusted-cost-base-acb.htm
http://www.milliondollarjourney.com/how-return-of-capital-works.htm


Another thing to watch out for is the difference between the way most writers/posters use the term ACB and the way schedule 3 of the Canadian tax forms uses it. 

The most common way is as the other posts - the ACB per share. On schedule 3 when calculating the capital gain or loss, the column is labelled "ACB" but it is really the total ACB for all shares sold (i.e. ACB per share x number shares sold).

So adding to your example, if after everything else you then sell 100 shares, the ACB per share is still $48.60 for all shares but on schedule 3 the ACB column will report $4860.00 for the 100 shares sold.

As a reminder - assuming there no commissions paid.


Cheers


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## humble_pie (Jun 7, 2009)

this example, because it includes partial swing trades, shows why it's important to maintain both cost base of total holding (in its current format) plus cost base per share, aka unit cost (also in its current format).

i always keep these figures up to date. That way, if i sell part, the total cost of shares sold is quik n easy. It's (unit cost at time of sale X no. of shares sold.)

the frustrating detail is that, if it's a US sale & taxpayer intends to use the CRA annual average exchange rate, this figure is not yet known at the time of sale. So it's necessary to leave the spreadsheet records for US transactions, both buys & sells, incomplete, inasmuch as they can't be rendered into CAD until january of the following year.

edit: shouldn't this be under taxation, though ?


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## Toronto.gal (Jan 8, 2010)

*Kaitlyn:* you have already been given the correct answer, but you could have answered your question yourself by writing every step as I did below [that's how I figured them out when new]. By doing this and keeping your calculations current as you buy/sell, you'll always know your ACB. 

- buy 100 @ $78 = $7,800
- buy 100 @ $110 = $11,000

add them up = 200 shares: $18,800 = *$94 ACB*

- Stock splits: 
[The $100 price has no relevance as regardless of price fluctuations, the fee you paid never changes, so don't confuse yourself with that].

add them up = 400 shares: $18,800 = *$47 ACB* 

- buy 100 @ $55 = $5,500

add them up = 500 shares: $24,300 = *$48.60 ACB*

For simplicity, I assumed no commission cost.

Sounds like LLL stock.


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## Kaitlyn (May 13, 2011)

Toronto.gal said:


> Sounds like LLL stock.


Indeed 

I attached a tracker i've been using... attached with fake data.

How do I go about accounting for suddenly having double the shares though?


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## Eclectic12 (Oct 20, 2010)

Kaitlyn said:


> Indeed
> 
> [ ... ]
> 
> How do I go about accounting for suddenly having double the shares though?


Hmmm ... all of the examples accounted for the doubling of shares by recalculating the ACB. 

So quoting the relevant section from Toronto.gals nicely bolded post:



> add them up = 200 shares: $18,800 = *$94 ACB*
> 
> - Stock splits:
> [The $100 price has no relevance as regardless of price fluctuations, the fee you paid never changes, so don't confuse yourself with that].
> ...


The line I've quoted in blue text is the stock split accounting. 

The total cost has stayed the same but the number of shares has doubled - due to the two for one stock split [i.e. 400 shares post-split = 200 x 2 ].


I hope this is clear ...


Cheers


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