# Why no tax form for capital gains



## Flash (Nov 25, 2014)

I was wondering why no tax information is given for capital gains. They do provide T5 for dividends, interest from savings, etc. But why no capital gains?

Quite a headache, especially if I wasn't prepared to keep account of every buy and sell I did. What happens if I miss some transactions and I report the incorrect number on my tax? I'm sure they forward a form to CRA for capital gains, otherwise people could just lie about their gains. Why they don't send one such copies to us?


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## PharmD (Dec 21, 2011)

I have always received a T5008 form when selling non-registered investments. The book value does not always seem to be completely accurate, but it does include information for a capital gain. I am really not sure if this is an optional form or not.


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## Flash (Nov 25, 2014)

I phoned the broker and they said they don't issue anything for capital gains. Only dividends or some sort of specific capital gain that the fund gives. But not when you sell the fund.


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## AltaRed (Jun 8, 2009)

Flash said:


> I phoned the broker and they said they don't issue anything for capital gains. Only dividends or some sort of specific capital gain that the fund gives. But not when you sell the fund.


The broker should not give you anything on cap gains/losses other than the T5008 statements each year for your buy/sells that year. The broker has no idea whether you hold the same security in another non-taxable account (which then has to be aggregated together) for ACB purposes. IOW, the broker cannot really know your ACB for cap gain/loss calculations. It is a taxpayer responsibility to keep track of their buy/sells, either through the annual T5008 statements or the trade confirmation slips. You do keep these I hope.


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## gardner (Feb 13, 2014)

How about managed funds that have DIVs, Gains, ROC, interest -- all manner of strange things happening internally -- that then gets converted into new units by a drip mechanism? In those instances I rely heavily on the MF to keep track of the book value for me. Sifting through 25 years of monthly statements to work out the FMV of the 0.3423 unit DRIP in Feb 1997 is not really in my game plan.


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## newuser (Sep 16, 2014)

Has anyone on this board ever been asked by CRA to prove the ACB of a capital gain/loss? What happens when you can't find your records? I keep decent records but even I may have lost track of some of my transactions from 20 yrs ago.


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## brad_g (Apr 12, 2013)

AltaRed said:


> ...same security in another non-taxable account (which then has to be aggregated together) for ACB purposes.


AltaRed did you mean taxable account? As far as I know securities held in registered accounts do not affect ACB of same securities held in taxable accounts.


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## Flash (Nov 25, 2014)

AltaRed said:


> The broker should not give you anything on cap gains/losses other than the T5008 statements each year for your buy/sells that year. The broker has no idea whether you hold the same security in another non-taxable account (which then has to be aggregated together) for ACB purposes. IOW, the broker cannot really know your ACB for cap gain/loss calculations. It is a taxpayer responsibility to keep track of their buy/sells, either through the annual T5008 statements or the trade confirmation slips. You do keep these I hope.


Well, they haven't even generated a T5008. They said nothing was generated. It was a MF with RBC.
Should I phone back and request this T5008? The MF was bought and sold in it's entirety in 2014.


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## brad_g (Apr 12, 2013)

Flash said:


> Well, they haven't even generated a T5008. They said nothing was generated. It was a MF with RBC.
> Should I phone back and request this T5008? The MF was bought and sold in it's entirety in 2014.


A quick Google suggests that MF companies don't generate T5008's. Instead you'll typically get a trading summary, along with the other tax slips. Either way they can't determine the actual gain without knowing the ACB, which is something you must calc yourself (or have an accountant do it).


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> The broker should not give you anything on cap gains/losses other than the T5008 statements each year for your buy/sells that year.


Depending on the broker ... there may not be a T5008 and may only be the T5/T3 plus an Annual trading summary




AltaRed said:


> The broker has no idea whether you hold the same security in another non-taxable account (which then has to be aggregated together) for ACB purposes.


Hmmm ... perhaps a slip of the fingers or a loss of focus? 

If the account is non-taxable (ex. TFSA or RRSP) there are not Canadian taxes ... I've never heard of anyone needing to aggregate taxable with non-taxable. 




AltaRed said:


> IOW, the broker cannot really know your ACB for cap gain/loss calculations. It is a taxpayer responsibility to keep track of their buy/sells, either through the annual T5008 statements or the trade confirmation slips. You do keep these I hope.


This I agree with mostly ... though not because of non-taxable account but because I've seen transfers from other taxable accounts (ex. company share plans or outright transfers from another broker) have bogus ACB numbers.

Then too, I don't mind a bit of bookkeeping to be sure I'm paying the correct taxes, no more or less than is required. No one cares for your money more than you do.


As I say ... I've never received a T5008 so one should make use of what they have and keep independent records to be sure everything is correct.


Cheers


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## AltaRed (Jun 8, 2009)

gardner said:


> How about managed funds that have DIVs, Gains, ROC, interest -- all manner of strange things happening internally -- that then gets converted into new units by a drip mechanism? In those instances I rely heavily on the MF to keep track of the book value for me. Sifting through 25 years of monthly statements to work out the FMV of the 0.3423 unit DRIP in Feb 1997 is not really in my game plan.


As I understand it, mutual fund companies do a pretty good (perfect?) job of tracking Book Value for you... which is the ACB. Their statements at the end of each year (if they publish them to you) will give you book values. There may be some issues with a partial sale of units during the year, i.e. I don't know if they calculate book values monthly or quarterly after every distribution so that might be tricky, but someone else who is familiar with actively managed mutual funds will have to chip in here.


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## AltaRed (Jun 8, 2009)

newuser said:


> Has anyone on this board ever been asked by CRA to prove the ACB of a capital gain/loss? What happens when you can't find your records? I keep decent records but even I may have lost track of some of my transactions from 20 yrs ago.


I have never been asked nor do I know anyone who has been asked BUT they can. CRA is aware that many people have not kept proper track of their ACBs so it is my understanding they will accept a 'best effort' by the taxpayer to get reasonable information. 

FWIW, the mutual fund companies and investor relations dept of corporations are pretty good at finding the information for you if you request it. I had to go through that in my father's estate. He had no clue about how mutual funds really worked and so his records were atrocious when it came time for me to do his last return. I went back to each mutual fund company requesting the buy and re-invested distribution data and all responded in a matter of weeks with that data.

FWIW2, I keep a copy of all Trading Confirmation slips and all T5008/Annual Trading Summary statements indefinitely (originally paper form until some brokers started issuing them electronically). Only one of those 2 things is really necessary and I plan on tossing all my paper Trading Confirmation slips at the next shredding opportunity. For many people who still had unused Capital Gains exemption room in 1994, they only need to go back to Budget Day 1994 when there was a step-up/grandfathering of cap gains at that time (crystallization).


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## AltaRed (Jun 8, 2009)

Yes, to those who spotted my faux pas...... I did mean taxable accounts:stupid: and yes, I recognize some brokers, e.g. Scotia iTrade, issue Annual Trading Summaries rather than a T5008. My sincere apologies.


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## Eclectic12 (Oct 20, 2010)

Flash said:


> I was wondering why no tax information is given for capital gains. They do provide T5 for dividends, interest from savings, etc. But why no capital gains?


The T5 tax form is a statement of "investment income". 
http://www.cra-arc.gc.ca/E/pbg/tf/t5/README.html

As I understand it, it is intended to track taxable income separately from the capital gains that buying/selling the stock will generate (reported on one's tax return using Schedule 3 "Capital Gains or Losses in Year 20##", part 3 "Publicly Traded Shares, MF Units ...").

It includes a capital gain box as on rare occasions, a stock will pay cash that is classed that is reported as capital gains (I think I've have this maybe twice in fifteen years).




Flash said:


> Quite a headache, especially if I wasn't prepared to keep account of every buy and sell I did. What happens if I miss some transactions and I report the incorrect number on my tax?


You will over or under pay the taxes ... if it's obvious based on the info CRA has, they might question it. If it's reasonable, it might stay as-is.




Flash said:


> I'm sure they forward a form to CRA for capital gains, otherwise people could just lie about their gains. Why they don't send one such copies to us?


When units/shares are sold, I believe the numbers are sent ... but the broker may have wrong info or no info so it's up to the individual tax payer to be keeping track. 


In theory ... the investor will have taken out a book on investing (or a tax book) or read an article like one in the link and figured out in advance of buying an investment in a taxable account. This lets them prepare for the yearly income to report and any bookkeeping required.
http://www.theglobeandmail.com/glob...he-abcs-of-tracking-your-acb/article17838427/

Even the most complicated forms of investments (ex. ETF or REIT having "other income", "eligible dividends", "foreign income", "capital gains", "return of capital"), in addition to the capital gains from selling the units/shares, when one has prepared for it, typically takes an hour or so a year. Capturing the needed info as well as doing timely updates in an Excel spreadsheet makes it about an hour or so a year.


I know this is going to sound annoying ... but any beginner's book on investing usually has a chapter on the need in a taxable account to be gathering this info and keeping good records.


Cheers

*PS*

Another resource is to go the CMF "Taxation" section and look at the sticky "How Investment Taxes Work" as a starting point. MFs are mentioned in the thread so here's another useful link ... http://www.taxtips.ca/personaltax/investing/taxtreatment/mutualfunds.htm
Note that this is for reporting the capital gains (or loss) when the units are sold ... not any capital gains paid as a distribution during the year.


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## Eclectic12 (Oct 20, 2010)

newuser said:


> Has anyone on this board ever been asked by CRA to prove the ACB of a capital gain/loss? What happens when you can't find your records? I keep decent records but even I may have lost track of some of my transactions from 20 yrs ago.


It hasn't happened to me ... yet. 

What has happened is that when I bought my first REIT, I assumed it was the same as the regular stock (i.e. eligible dividend paying or non-dividend paying). For some of those, the paperwork was one buy in year ####, one sell ten years later with at worst, only eligible dividends to report yearly.

It was a pain in the butt to estimate how much RoC was paid in each year ... particularly with one REIT that was bought twice before I sold it. Now I check out the tax requirements before buying as it's easy to add a step or two to what I do every year to update my ACB tracking spreadsheet. There are also software programs that can be bought or this online ACB tracking system (http://www.adjustedcostbase.ca/).

AFACIT ... I was reasonably accurate as the numbers were accepted as-is (though I might have over-paid the "when sold" capital gains a bit).




AltaRed said:


> Yes, to those who spotted my faux pas...... I did mean taxable accounts:stupid: and yes, I recognize some brokers, e.g. Scotia iTrade, issue Annual Trading Summaries rather than a T5008. My sincere apologies.


No worries ... usually you are correcting something I overlooked/glossed over or did not consider. :biggrin:


Cheers


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## Grover (Jun 3, 2013)

Is this ACB just as easy to calculate if you trade with margin? 
How do the calculations change vs trading with cash?
And shorts?


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## kcowan (Jul 1, 2010)

Grover said:


> Is this ACB just as easy to calculate if you trade with margin?
> How do the calculations change vs trading with cash?


After deducting commissions, also deduct interest.


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## Eclectic12 (Oct 20, 2010)

kcowan said:


> Grover said:
> 
> 
> > Is this ACB just as easy to calculate if you trade with margin?
> ...


This is not true from my understanding.

The ACB is the cost of the investment itself to figure out the capital gain (or loss) while margin or interest cost is a separate deduction. So the ACB calculation stays the same, regardless of whether cash or margin (or a Loc or HELOC) is used.

Interest charges (assuming one has done what is needed, if anything, to keep 100% of the interest cost tax deductible) are deducted on the T1 form, on line 221.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/221/menu-eng.html

The ACB for the shares sold is used on schedule 3 "Capital Gains or Losses for 20##", part 3 "Publicly traded shares, MF units ..." in column 3.


Be careful about the term "ACB" because some sources will provide a formula that is the ACB for all shares. For example, buy 200 shares for $12 a share on Feb 2015 with $10 commission. This ACB = share cost + purchase cost = $2400 + $10 = $2410.

The investor might sell part instead of all the shares so formula for ACB for some sources will also divide by the number of shares. This ACB is $12.05. 

Say in Nov 2015, 50 shares are sold. When filing out the 2015 tax return in 2016, knowing the per share ACB makes the Schedule 3, part 3 ACB easy as it's 50 x ACB per share = $602.50.


The key here is that the tax form wants the ACB *for the number of shares sold* in that tax year. There's still 150 shares which have their own ACB where buying more shares (or DRIPing shares which is buying more) is going to change the ACB.


For the interest expense, if it is rolled into the ACB ... consider what would happen if one buys in 2015 and sells in 2020. This would mean there's no deduction from income for 2015 through 2019. Line 221 means that as each year passes, the interest expense paid in that tax year will be deducted from income on the matching tax year's T1 form. 

http://www.taxtips.ca/personaltax/investing/interestexpense.htm

Cheers

*PS*

I believe the wording "deduct commissions" is also a problem. 

The ACB is setting what the investor paid where a buy commission is a cost. It should be added to the ACB, not deducted. Where a sell commission is paid, this is reported on Schedule 3, Part 3, column 4 "Outlays and Expenses from dispostion".

The net effect is that that the buy commission(s) are increasing the cost (ACB) and the sell commission(s) are decreasing a capital gain (or increasing a capital loss).

Here is an example for the simple case, a stock ... which is calculating the per share ACB.
http://www.milliondollarjourney.com/calculating-your-adjusted-cost-base-acb.htm


I say simple case as ETFs, Index Funds, REITs and some MFs pay multiple types of income. If one of those types is return of capital (RoC), this will also change the ACB.

http://www.theglobeandmail.com/glob...he-abcs-of-tracking-your-acb/article17838427/


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