# Calculating Capital Gains in Aggregate using Yearly statements



## crozfader (Aug 2, 2012)

Hi All.

I'm trying to figure out how to calculate my capital gains and losses myself using my yearly activity statement. 

I'm hearing different things from different sources and would like to shed light on the matter... I know there are several ways to look at it, but it can't be that hard when only one type of product is bought/sold (i.e. stocks).

I hold some dozens of stocks. Some stocks were bought in prior years others were opened and closed in 2011. 


Here's an example using some totals I copied from my statement:

Net Trades (Sales): $4,449.45
Net Trades (Purchase): -$2,884.55

Realized Performance Summary (Stocks) : -$47.53
Commissions: -$20.20
Other Fees:-$340.68
Cash FX Translation Gain/Loss: -$63.61

How can I go from these numbers to calculating the amount to put in Box 20 & 21 and my capital gain for the year?

Thanks in advance


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## Eclectic12 (Oct 20, 2010)

There can be several problems with this method.

The first problem can be that the yearly statement might not have the information you need. For example, I just sold some stock that I bought in 2003, so my 2012 summary will have the sell transaction but nothing for the buy transaction as it is not the same year. Then too, even if I went looking, I'm not sure that in 2003 my brokerage was providing a yearly summary in the first place.

The second problem is that I've seen the yearly summary have the wrong numbers on it. It is happening less but it does still happen. 


For these two reasons, I prefer to keep a spreadsheet that has a tab for each stock, with the appropriate calculations for each event that affects the capital gain (cg) or loss (cl) calculation. That way, I can compare what's on the annual statement against what I've calculated.


What sort of form are you receiving as you mention having to fillout box 20 and 21?


There are no boxes to fill out for me. I'm reporting each stock transaction on Schedule 3, part 3 labelled "Publicly Traded Shares, Mutual Fund Units ..." of my tax return, summing the gains and losses to end up with the total amount.


Cheers


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## warp (Sep 4, 2010)

You are really complicating the issue.

There are only 2 things you need for stock holdings.
1) the price/amount you paid when you bought the stock. ( including commissions)
2) the amount you received when you sold the stock ( which will automtically be minus commissions)

Subtract one from the other and you have a gain or a loss. You report the gain/loss on EACH stock sale in the year it was done. It does not matter if you held the stock for 1 day, or 20 years.

If you sell only a portion of a particular stock holding in a year..( you bought 1000 shares 5 years ago, and sold 500 shares this year).....your gain or loss would be on the 500 shares you sold this year, and you would still own 500 shares.

If you bought shares at several times...(eg 200 shares on 2008, 300 more in 2009, 400 more in 2010 and 100 more in 2011= 1000 shares, or even if you made the 4 buys in the same year).....the purchases would be at different prices. Simply add up all your costs on the 4 buys, and divide by the number of shares you bought to come up with an AVERAGE buy price per share, ( including all commissions). This is the costs you would use if you sold half (500) of your shares in any one year, to figure out your gain/loss which you must report only on the shares you sold, only in the year you SELL.


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## crozfader (Aug 2, 2012)

The realized performance summary computes the gains/losses for the current year regardless of when the position was opened... As long as the position was closed in a given year, the realized performance summary should capture. I lost 43$ that year before commissions even though a lot of the stocks sold were bought in previous years...

If I understand what you are saying correctly, then the "realized performance" minus commissions would give you your total capital gain for the a year. Box 20 and Box 21 that I'm alluding to are found on the Canadian capital gains form T5008. Typically the difference between Box 21 and Box 20 will give you your capital gains. Is there a way to report the capital gains only without actually specifying the cost and proceeds?


Do I really need to report every single trade? Or can the reporting be done in aggregate? I know that back in the days, it needed to be done at the transaction level, but I've heard that aggregate reporting is now accepted and widely used.


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## humble_pie (Jun 7, 2009)

croz if your total sales for the year in question were 4,449.45 the gains/losses should have been better than ($45.53). Generally speaking.

i for one would not go with any broker-generated "realized gains" figure. Where brokers are most likely to eff things up is when securities split off from or merge with each other, or are acquired pursuant to options exercise, or when special dividends are paid out that affect the cost base.

the standard protocol for preparing capital gains reports is to track each individual security from the day or days it was first purchased. Investors generally keep these records in spreadsheet or logbook format.

if swing trading or disposing of partial holdings only, it's always necessary to know the ACB per share. It's also necessary to record USD exchange rates for US securities on both the purchase date(s) & also on the sell date(s). Exchange rates are also vulnerable error points where a broker's "reporting" system can make mistakes.

brokers are not required to present accurate capital gains or ACB reports for non-registered accounts. The information that they do offer is done as a service only. Brokers will disclaim every responsibility & every investor can easily find the disclaiming statements.

eclectic & warp have the right idea upthread. I for one don't even bother to look at brokers' trading summaries.


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## Eclectic12 (Oct 20, 2010)

crozfader said:


> The realized performance summary computes the gains/losses for the current year regardless of when the position was opened...
> 
> Do I really need to report every single trade? Or can the reporting be done in aggregate? I know that back in the days, it needed to be done at the transaction level, but I've heard that aggregate reporting is now accepted and widely used.


Any link I've read on CRA or tax book indicates that a capital gain or loss *includes* the expenses such as commissions. If the realised performance summary is truly reporting the CG or CL, it should already include the commissions. 

But again - if you have a total number and aren't tracking the individual transactions, how do you know it is accurate? CRA once tried to get me to pay thousands of dollars in penalties because of a keying error on their end.


As for the aggregate reporting ... I'm not sure. Just like I'm not sure why some get a T5008 and some don't (i.e. me). I expect that an audit would require the transactions so I prefer to have them available instead of trying to figure it all out, years later and with limited information. (Been there & done that for trust units and it was *painful*.)


Cheers


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## TaxGuy (Apr 7, 2009)

1. Capital gains and losses are calculated on a security-by-security basis. For example, if you have two stocks: Bell and Telus, you would calculate the gains and losses for Bell and then Telus. They are not combined.

2. Capital gains and losses are only taxable when realized. This means that you have to sell something to have a tax gain or loss.

3. The cost of the position is what you paid for it plus commissions. If you sell part of a position, you take your cost and divide it by the number of shares held right before the sale to get the average adjusted cost base.

4. The gain or loss is the proceeds of the sale (what you got less any commissions you paid) less the average adjusted cost base.


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## Eclectic12 (Oct 20, 2010)

humble_pie said:


> eclectic & warp have the right idea upthread. I for one don't even bother to look at brokers' trading summaries.


I use mine as an independent check that I haven't missed anything. As life gets busier, I'm finding more often that I can and sometimes do overlook things. :biggrin:


My broker trading summary however - only lists transaction details (i.e. date, sell/buy, number of shares, price, commission) for the year. It makes no attempt to provide things such as capital gains [or loss] and is not a T5008 form.

Where my spreadsheet lists the same number of sales as the yearly broker trading summary, I'm much more confident what I'm putting on the tax return is accurate.

... but as long as it works for the individual, it's all good.


Cheers


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## crozfader (Aug 2, 2012)

Hi all.

Thanks for the great info. 

I contacted my broker's customer service and asked some questions. This is what I found out.
- The realized summary gain contains all of the trades that were closed during a calendar year. If a security was bought in a prior year and sold in the current year, that sale will feature in the summary of the current year. So even though I sold $4000+ worth of securities this year (for only $2800 in purchases in the current year) I still lost $43 because some securities were bought in prior years. 


From what I understand, you're realized gains minus commissions is your capital gains/loss for a year. I really see no reason why my broker's summary, which lists every trade sold in the year individually would not suffice to calculate gains losses... Of course, I'm working under the assumption that the summary is correct (some of you mentioned that some errors occur).


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## Eclectic12 (Oct 20, 2010)

You are welcome for the info.

Just to make sure it is clear ... the prior year securities purchase price is what will determine whether *that* security was a loss and reduced the gain (as seems to be for you). Buying in a previous year just means the buy transaction(s) won't be on the current yearly summary.


It may be terminology but as mentioned upthread, it is standard practice for a capital gain (or loss) to have the commissions factored in. I'm surprised the broker would call it a "realised gains" where the commissions are not included.

I'm hoping that your comment about "lists every trade" means that you plan to calculate the gain (or loss) for yourself to check the totals.


As for assumptions ... what's the saying about assumptions? 

The risk of running with the assumption are that either you pay the incorrect taxes or CRA sends a notice of assessment that matches their numbers instead of the brokers. Without having the details at hand - it is hard to confirm what is happening, why the assessed taxes are the number they are and likely would not make for a smooth audit (if you are selected for one).



BTW, for form T5008 - where you thinking *you* would fill it out? 

If so, this CRA link says the T5008 is for those buying securities on behalf of others - which does not seem to be the case here. It would be your broker, who bought on your behalf, who would send a T5008 to you.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slps/fnncl/t5008/t5008slp/prpr-eng.html


Cheers


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## crozfader (Aug 2, 2012)

My broker does produce a T5008 that contains in aggregate form my total capital gains/losses for the year, this is exactly what I was questioning in the first place... I wanted to know if I could readily use the filled form my the broker produces, hence my original post... 

What do you think of that?

Thanks for all the help, much appreciated.

____________________________________________________________________________________________

BTW, for form T5008 - where you thinking *you* would fill it out? 

If so, this CRA link says the T5008 is for those buying securities on behalf of others - which does not seem to be the case here. It would be your broker, who bought on your behalf, who would send a T5008 to you.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slps/fnncl/t5008/t5008slp/prpr-eng.html


Cheers[/QUOTE]


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## Eclectic12 (Oct 20, 2010)

crozfader said:


> My broker does produce a T5008 that contains in aggregate form my total capital gains/losses for the year, this is exactly what I was questioning in the first place... I wanted to know if I could readily use the filled form my the broker produces, hence my original post...
> 
> What do you think of that?
> 
> Thanks for all the help, much appreciated.


[/QUOTE]

Fair enough ... re-reading the post plus some of the others had me thinking you were going to fill one out yourself.

As for using it - as mentioned upthread, there is risk with using the aggregated numbers without cross-checking it. 

If you are going to cross-check, then IMO it is far easier to take a few minutes each time a buy/sell is made and update the numbers in say, a spreadsheet. That way, when the T5008 is received - most of the numbers needed are already current plus in one place.


To illustrate why I'm a fan of keeping up to date - when I bought trust units, I thought they were the same as a regular share and didn't bother keeping up to date. When I sold eight years later, I discovered I needed to update the Adjusted Cost Base (ACB) for the Return of Capital (RoC) part of the cash payments. As the trust had been bought out before the sale - determining how much of the cash paid was RoC was easy for the new trust units but determining the original payments was painful. While the T3 detailed summaries are better these days, a spreadsheet that is no more than a year out of date I find handy.


Cheers


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## TaxGuy (Apr 7, 2009)

I would agree with Eclectic12, to cross check. In fact, I would say that its more effective to record each trade in a spreadsheet and keep track. Brokerages are notoriously inaccurate when capturing the original cost of securities and send out incorrect statements all the time!


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## Eclectic12 (Oct 20, 2010)

^^^

The OP has already indicated there are some buy transactions in previous years, resulting in a capital loss for 2011. So at minimum, unless the broker's statement is deemed right and whatever consequences down the road are accepted - there is a least a bit of research needed. 

A spreadsheet that is kept reasonably current IMO allows one to focus on calculations and the cross checking instead of " ... now what year was this bought for how much?"


Then too - if the amount is wrong where CRA decides to assess a penalty, it is the investor who is on the hook for any owed taxes and/or penalties, not the broker.

If the error is found a couple of years down the road, the penalty assessed can be substantial. 


For the keying error by CRA I mentioned up thread, the tax returns had already been filed/assessed at least two years previously. Then the keying error happened so that the first notice I received was the "notice of re-assessment, you over contributed and owe $5x plus $7x in penalties/interest". 

The two parts that surprised me were that:

1) After twenty minutes on the phone arguing this was not possible due to factors a, b & c - please check the numbers for anything strange - the clerk reviewed the numbers. The keying error was found/fixed in under five minutes. 

2) Fixing the error only meant that the room was made available again. To use the room, I had to file a T1-ADJ to adjust *each* of the affected tax returns (four returns as I recall). The explanation was that I might *choose* to save the room for another year. Who in their right mind would choose to pay taxes (and penalties) they don't owe?

It didn't take long to file the adjustments and everything was properly re-re-assessed after about three weeks.


Cheers


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