# Complicated capital gains calculcation



## Stirling (Apr 2, 2015)

I would have thought this question had been answered here already, and maybe it has, but I can't find it. 

What is the capital gains on a security when it has been purchased and sold multiple times? For example:

August 2013: bought 100 ABC @$10
January 2014: bought 100 ABC @$20
March 2014: sold 50 ABC @$30
June 2014: bought 75 ABC @$5
December 2014: sold 150 ABC @$15

Is the adjusted cost base calculated on ALL the shares over the ENTIRE year, or is it calculated each time the stock is sold?

So would the capital gain on the March 2014 sale be calculated on the basis of the stocks purchased in August 2013 and January 2014, or would it be calculated on December 31st on the basis of average cost over the whole of 2013 and 2014?


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## 0xCC (Jan 5, 2012)

Calculated each time the stock is sold.

So total invested in ABC in March 2014 was 100*10 + 100*20 = $3000 or $15/share, cap gains for March 2014 sale would be $15.
New cost base after March 2014 sale is 150 shares @ $15 each or $2250
June 2014 is a new cost base, added $375 for a total of $2625 or $11.67/share on 225 shares.
December 2014 sale generated a cap gain of $3.33/share or $499.50 (150 * (15-11.67)) and the new cost base is $874.50 or the same $11.67/share on 75 shares as after the June purchase.


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## wendi1 (Oct 2, 2013)

Don't forget to take into consideration the reinvested dividends and return of capital.

The search term you need is "ACB" or adjusted cost base.


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## humble_pie (Jun 7, 2009)

the answer is probably not what you'll want to hear ...

the answer is that the stock-swinging taxpayer has to do a lot of finickity bookkeeping.

at all times, total ACB (adjusted cost base) plus ACB-per-share records have to be maintained. The ACB per share is always going to be the adjusted average for each time period between trades.

like so:

_August 2013: bought 100 ABC @$10
January 2014: bought 100 ABC @$20_

- spreadsheet should show 200 shares
- total ACB $3000.00
- ACB per share $15.00

_March 2014: sold 50 ABC @$30_

- spreadsheet should now show 150 shares remaining
- cost of shares sold ($15 x 50) or $750.00
- capital gain/loss = proceeds ($30 x 50) or $1500.00 less cost $750.00, or gain is $750.00
- cost of remaining holding ($15 x 150) or $2250.00


as of march 2014, holding should now read 150 shares @ unit cost base $15, total ACB $2250.00.

carry on from there.

each & every swing trade gets its own separate calculation. Things get even more complicated when trades are US, because the exchange rate(s) of the various cost purchases are different from the exchange rates of each sell.

hint: i keep my gain/loss spreadsheets in CAD only in the final columns because those are the figures that the CRA wants. For US purchases, i can't be bothered to run additional columns showing up-to-date ACBs in US dollars only.

hint numero due: in calculating Cost of Remaining Holding after a partial sell, do *not* subtract the actual proceeds of the partial sell (many folks do this & it's wrong.) Instead, multiply number of remaining shares X the ACB per share for the remaining shares, as shown in example above.

if you feel daunted by all this, i have at least one friend who deliberately never swing-trades & she sells all of her shares before the end of every tax year, just so she'll never have to do these calculations. Otherwise she's a pretty good investor each:


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## Stirling (Apr 2, 2015)

Thank you all for the answers.

This is going to be painful! I can understand why some people cash out at the end of the year just to avoid this, but at such a cost in taxes payable.

The good news is I have a spreadsheet with every single buy and sell, thankfully of only one investment (bitcoin). The bad new is the work that is ahead of me.

I'm surprised there isn't software available into which I could dump this data and get the answer to pop out.


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## Toronto.gal (Jan 8, 2010)

Stirling said:


> This is going to be painful! I can understand why some people cash out at the end of the year just to avoid this, but at such a cost in taxes payable.


It's not complicated/painful at all, just new to you for now. Note that commissions should be included in your calculations.

Below link previously posted by member fatcat is very helpful [you can try it first as a guest if you don't want to register, and your data will keep for 2 days]. Even when you won't do the calculations manually, you should still understand how straightforward they are so that you should become an informed investor. 

It's more convenient but silly to sell all at year-end simply out of laziness/fear of learning [which could prove costly, too]. 

http://www.adjustedcostbase.ca/blog/using-a-guest-account/
http://www.adjustedcostbase.ca/blog/
http://www.taxtips.ca/glossary/adjustedcostbase.htm


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## humble_pie (Jun 7, 2009)

public ACB software might be OK for a novice investor to try one stock in a single pass

but regular investors should not file their portfolio histories on an anonymous website where the info can be harvested or hacked by strangers

imho


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## Beaver101 (Nov 14, 2011)

Toronto.gal said:


> ...
> 
> http://www.adjustedcostbase.ca/blog/using-a-guest-account/
> http://www.adjustedcostbase.ca/blog/


 ... I agree the above is a great learning tool, especially for newbees. No need to save your actual portfolio numbers, just test it first with the examples you have given above to verify its accuracy. 

In addition to fatcat's and Toronto.gal's links posting, this was recommended by the G&M also,

http://www.theglobeandmail.com/globe-investor/investor-education/the-abcs-of-tracking-your-acb/article17838427/


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## Stirling (Apr 2, 2015)

Thank you again to everyone. This has been extremely helpful and the tool at adjustedcostbase.ca has been a huge timesaver.


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## Eclectic12 (Oct 20, 2010)

Stirling said:


> ... I can understand why some people cash out at the end of the year just to avoid this, but at such a cost in taxes payable.


Cashing out is going to add another set of calculations that need to be done ... I am not following how adding another round of calculations is "avoiding" anything.





Stirling said:


> ... This is going to be painful! ... The good news is I have a spreadsheet with every single buy and sell, thankfully of only one investment (bitcoin). The bad new is the work that is ahead of me.
> 
> I'm surprised there isn't software available into which I could dump this data and get the answer to pop out.


If you have a spreadsheet ... you are most of the way there. 

The ACB to figure out the capital gain (or loss) is like a balancing a cheque book (only the type of investment can add more types of transactions). Each time an event that affects the ACB happens, one updates it. When one sells, one reads off what the ACB is for the shares sold.

Yes, there is software sold ... it is banking type software which tracks savings/chequing and adds in an investment tracking section.


I'd suggest going to your library and borrowing a book on investing or taxes. The one I read years ago, walked through the situation you have posted for.


At the of the day ... where one has been keeping the ACB up to date, when each sale occurs - it should be easy to figure out what the cost was for the shares sold.


As others posted ... after you've learned what's needed ... it really is a simple process. For example, my spreadsheet is setup so I entry the buys/sells and it figures out for me based on what has happened until the specific event what the ACB is. 


Cheers


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## WiseOwl (Jan 1, 2015)

Check to see if a capital gains/loss report is included in your annual tax package that you receive from your investment broker. The discount investment accounts generally won't provide this report, but some of the slightly more expensive ones will. For some people the extra money paid to the brokerage for this reporting might be "worth it" in terms of time/frustration saved that you would have to spend tracking gains and losses manually.


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## Retired Peasant (Apr 22, 2013)

I use the Excel file provided at
http://www.canadiancapitalist.com/free-acb-capital-gains-tracker-in-excel/


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## Eclectic12 (Oct 20, 2010)

To get back to answering the question asked ... the ACB used is for all shares owned at the time of the sale, with the appropriate amount allocated to the number sold.

Assuming the simple case where there is no RoC being paid or dividends buying additional shares - at the time of the sale in March, the ACB needed will be the ACB for the 200 shares owned, where the amount for the fifty sold that is being reported in 2014 on Schedule 3 "Capital Gains or Loss for year 2016", Part 3 "Publicly Traded Shares or Units" is whatever 50 shares works out to be.

For the next sale, the ACB will be whatever remains plus any purchases that happened after the March sale and up to the next sale in December.



Be careful about the term "ACB" ... the schedule 3, part 3 says "ACB" where they want the ACB for the fifty shares sold. Some web sites will provide a formula that is the ACB *for all shares owned*. Others provide a formula for ACB which is the per share version. For example, the ACB for all shares might be $2000 but the ACB per share for 200 shares would be $10.

I find the per share easier because then the tax form number is a simple calculation (i.e. # of shares sold x the per share ACB). 

My spreadsheet handles both as once the total ACB is calculated, a column that divides this by the # of shares owned is easy.

I also find it best to update my spreadsheet when I buy or sell as I have the info needed at hand. Then when doing the tax return months down the road, a quick lookup is all that's needed.


Also bear in mind that the commission(s) to buy are added into the cost (ACB) ... the selling commission(s) are not as there is a column on Schedule 3, Part 3 to subtract this expense.


Cheers


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## Toronto.gal (Jan 8, 2010)

Stirling said:


> Thank you again to everyone. This has been extremely helpful and the tool at adjustedcostbase.ca has been a *huge timesaver.*


Glad it saved you time....tis the season. When you have time, you might want to read some of the blog topics, which has a lot of helpful information for beginners.


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## humble_pie (Jun 7, 2009)

a tiny note: swing traders - by swing traders i mean investors who sell part of a holding, then buy a few more shares, then sell another fraction of the holding, then buy a bunch more shares, then sell some but not all of the holding, then buy, then sell - you get the drift - swing traders *must* keep the Adjusted Cost Base per share.

swing traders need ACB per share because it's the only way they can calculate the cost base for each bundle of shares that they sell. They need to multiply the number of shares sold in the individual transacton by the ACB per share as of that point in time.

i always keep both. ACB per share. ACB of total holding. Continuously updated with each transaction.

the brokers, BTW, are making far too many cost base mistakes. Apparently the licensed representatives are free to phone or contact the back office. The reps are not careful enough with their tasks. They often casually send wrong info or else they send info to the wrong account. Then lickety split the back office voids all existing cost base information & enters the mistake instead.

this is a disaster for the client investor who fails to keep accurate cost base records of their own.


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## Eclectic12 (Oct 20, 2010)

Stirling said:


> ... This has been extremely helpful and the tool at adjustedcostbase.ca has been a huge timesaver.


I can see how it would help where one hasn't already been tracking the ACB.

I'll have to play with it as my impression is that firing up my spreadsheet and updating it (no account needed, forumlas already built in) as the purchases seems faster to me.


Regardless ... as long as the point in time ACB is correctly assigned to the partial shares sold, having a tool one is comfortable with that is used is more important than the type (i.e. web site, software like Quicken or GnuCash or a spreadsheet).


Cheers


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