# What is the actual capital gain when finished a buy and sell



## undersc0re (Oct 7, 2017)

I buy 100 shares at $10 a share = $1000+$6.95 commision = $1006.95 
I sell 1000 shares at $20 a share = $2000-$6.95 commision = $1993.05

Is my capital gain $1000.00 or is it $986.10?

This is in Canada and as someone who trades maybe 3 times a week in Canadian companies in a non registered account, the stocks are being bought and sold within a month or 2.

I have been doing this for a very short time and I am just wondering what to expect, I will be getting a small accounting/tax firm to do my taxes.

Just kind of confused on whether to take the 2 commision fees off of my buy and sell profit to figure out total capital gain.


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## agent99 (Sep 11, 2013)

You need to first look up ACBs. (Adjusted Cost Base) For example: 
https://www.canada.ca/en/revenue-ag...ons/t4037/capital-gains-2016.html#P1185_82580

https://www.canada.ca/en/revenue-ag...ions/t4037/capital-gains-2016.html#P317_34283

In your example, $986.10 would be correct. You would do this for every transaction where you sold a stock at tax time and calculate the net effect (losses reduce gains) when you submit your taxes (there is a form for this). If you do not sell, the acb carries over to following years.


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## OnlyMyOpinion (Sep 1, 2013)

Your $986.10 capital gain is correct. If you refer to Schedule 3 of your tax return, for your example:
Column 2: Proceeds of Dispositon $2000 (this is your gross proceeds before commission is deducted)
minus 
Column 3: Adjusted Cost Base $1006.95 (this was your cost to purchase including commission)
minus
Column 4: Outlays and Expenses (from disposition) $6.95

$2000-$1006.95-$6.95= $986.10


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## undersc0re (Oct 7, 2017)

Thank you, that is what I figured, just wanted to confirm!


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## Eclectic12 (Oct 20, 2010)

undersc0re said:


> OnlyMyOpinion said:
> 
> 
> > Your $986.10 capital gain is correct ...
> ...


Not sure there is enough info to make this conclusion. 

The way I can see this being correct is if:
a) buy 100 shares
b) company does a 10:1 share split to increase the number of shares to 1,000
c) sell 1,000 shares

With the talk of trading multiple times a week with ownership of one or two months ... the 10:1 split is incredible lucky timing, which does not seem likely.
I can recall Canadian companies doing reverse splits of 1:10 (i.e. 100 shares becomes 10 shares) but have a hard time remembering 10:1 splits that would increase the number of shares that much.


*undersc0re:*
Is the 100 shares a single stock that between buying the 100 shares and selling the 1,000 shares, a 10:1 stock split occurred?
For example, buy 100 Metro - have each share swapped for "10 new Metro" so that the total shares becomes 1,000 shares, then sell.

If not, then more info is likely required to be sure that the CG calculation is correct.


With so many trades a week as well as talking about "stocks" while the CG calculation is for a single stock - I wonder if there are misunderstandings at play.

For example, if the 100 shares is 70 shares of Metro and 30 shares of BNS then two CG calculations are needed as part of what is required on the tax return on Schedule 3, Part 3 is to name the shares and the year of acquisition. Schedule 3, part 3 would have two line entries, calculating the CG for each stock separately - before the totals were added up.
https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/5000-s3/5000-s3-17e.pdf

Regardless, with so much trading as well as short term holding in a NR account - the OP likely should be reviewing whether they fit reporting this as CG or business income to confirm whether CG matters or not. https://www.taxtips.ca/personaltax/investing/taxtreatment/capitalorincome.htm


Cheers


*PS*
The sticky *How Investment Taxes Works* has links to articles on "How Capital Gains Tax Works" as well as "How to Calculate your Adjusted Cost Base" that will help.


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## Eclectic12 (Oct 20, 2010)

Or another possibility is the sale side of 1,000 shares is a typo where only 100 shares were sold. :biggrin:


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

Eclectic12 said:


> Or another possibility is the sale side of 1,000 shares is a typo where only 100 shares were sold. :biggrin:
> Cheers


That was my assumption, perhaps wrong though.


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## twa2w (Mar 5, 2016)

Eclectic12 said:


> Or another possibility is the sale side of 1,000 shares is a typo where only 100 shares were sold. :biggrin:
> 
> 
> Cheers


Yes most likely given that if it was 1000 shares sold at 20.00 then the capital gain would be a heck of a lot bigger than 900 odd dollars.


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## Nerd Investor (Nov 3, 2015)

I assumed typo as well. Chances are your broker is already netting out the commission from your reported proceeds and adding it to your reported purchase price so it's unlikely you'll have to manually factor in the commissions.


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## Eclectic12 (Oct 20, 2010)

YMMV ... for my broker, the Proceeds may or may not have the sales commission taken out of it.

The book value only exists while one owns the stock. Whenever I check, it matches purchase prices(s) + buy commission(s) with no sell commission included. I have yet to find where a sell commission was included.

Where one looks at the monthly statement where the sale goes through, the "Credit" column is the (# shares x sale price) with no sell commission adjustment. The "Account Balance" column credits the net amount, after removing the sale commission. For example, the "Credit" column will show $2085 where the "Account Balance" is credited by $2075 for a $10 sell commission.

The Annual Trading Summary give the "Proceeds" as the net amount (i.e. $2075) but also lists the sell "Commission" at $10. IMO, this is confusing as one either needs to adjust the "Proceeds" number up or skip including the sell commission.

The T5008 entry for the sale includes the sell commission in the Proceeds. Where one uses the "Proceeds" from the annual trading summary - it won't match what is on file in the T5008 CRA has a copy of.


Cheers


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## undersc0re (Oct 7, 2017)

Sorry for the typo, it should be 100, I talked to the accountant/tax person today and I am definetly not a day trader and it would not be considered a business unless I made enough to live on just doing that and traded a heck of a lot more than I do, need a lot of transactions.


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## can_84 (Jul 2, 2011)

1st Purchase:
Commission: $6.95 
Share Cost: $1,000.00 
ACB: $1,006.95 
# of Shares: 100
ACB Per-Share: $10.07 


1st sale: 
Proceeds: $2,000.00 

Cost Base: -$1,006.95 
Sales Commission:	-$6.95 
Capital gains: $ $986.10 

Taxable Capital Gains at 50% Inclusion Rate: $493.05 




The taxable capital gains will be added to your division B income and taxed at your marginal rate. 

Assumptions: I am assuming you bought 100 shares and sold 100 shares. 

(The above is just my opinion and does not constitute as tax advice as I am not your advisory)


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## undersc0re (Oct 7, 2017)

1st Purchase:
Commission: $6.95	
Share Cost: 200 x 19.92= $3984.00
ACB: $3990.95 
# of shares: 200. <--fixed typo sry.
ACB Per-Share: $19.95

2nd Purchase:
Commission: $6.95	
Share Cost: 75 x 17.48= $1311.00 
ACB: $1317.95 
# of Shares: 75
ACB Per-Share: $17.57 

1st sale:	
Proceeds:	75 x 18.69 = $1401.75

Cost Base:	-$1317.95 
Sales Commission: -$6.95	
Capital gains: 

2nd sale:	
Proceeds:	200 x 20.45= $4090.00

Cost Base: -$3990.95
Sales Commission: -$6.95
Capital Gains: 

I made 2 purchases at different times during the spring 2018 then sold 2 different times during the summer. The amounts just happen to match.
Would I just add the 2 buys together and calculate the cost from average and the same with sells for acb? 
T5008 on cra shows cost or book value as 200 shares at $3861 and proceeds of disposition at $4083 and the 75 shares as $1447 cost or book value and $1394 as proceeds or disposition settlement.

Basically what is the math cra used and what should I use in this case acb?


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## Eclectic12 (Oct 20, 2010)

undersc0re said:


> Sorry for the typo, it should be 100, I talked to the accountant/tax person today and I am definetly not a day trader and it would not be considered a business unless I made enough to live on just doing that and traded a heck of a lot more than I do, need a lot of transactions.


The closest factor I've read of is "security transactions form a part of the taxpayer's ordinary business" with no amount involved, in the factors CRA is reported to look at. "Trading enough to live on" isn't listed AFAICT.
https://www.taxtips.ca/personaltax/investing/taxtreatment/capitalorincome.htm


There's also the report that a judge turned to trading summaries to determine intent where something over six hundred spread over five years was enough.
https://www.advisor.ca/columnists_/jamie-golombek/when-trading-profits-are-income/

Three trades a week is 3 x 52 = 156 > 600 / 5 = 120

Should the trades be a pair of buy and sells to be 6 x 52 .... well you get the idea.



Cheers


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## Eclectic12 (Oct 20, 2010)

undersc0re said:


> ... Would I just add the 2 buys together and calculate the cost from average and the same with sells for acb?


Yes ... but there seems to be a typos.

For purchase one, buying 200 shares should mean the number of shares owned is 200, not 100.
The "ACB" which I would call total ACB = $3990.95 

As no sales were made, when purchase two happens - total ACB = old ACB + new shares purchased ACB = $3990.95 + $1317.95 = $5308.90
Shares owned = old shares + new shares = 200 + 75 = 275
ACB per share = total ACB / shares owned = $5308.90 / 275 = $19.30

When sale one happens, it is a partial sell so I'd use the partial sale ACB = number of shares sold x ACB per share = 75 x $19.30 = $1447.50
Or you can use the total ACB by applying fractions. Partial ACB = total ACB x (shares sold / total shares owned) = $5308.90 x (75/275) = $5308.90 x 0.27 = $1443.40



The key point here is that where multiple buys happened, your cost base has changed as more shares at a different cost is going to change the average. Similarly, if you have another 100 shares in a different taxable account, they'd have to be added in as well.
https://www.theglobeandmail.com/glo...he-abcs-of-tracking-your-acb/article17838427/


Selling will change the total ACB as fewer shares are held but won't change the ACB per share.





undersc0re said:


> ... T5008 on cra shows cost or book value as 200 shares at $3861 and proceeds of disposition at $4083 and the 75 shares as $1447 cost or book value and $1394 as proceeds or disposition settlement.
> 
> Basically what is the math cra used and what should I use in this case acb?


CRA is going use whatever numbers the broker provided to them ... whether the numbers are right or wrong. Most brokers don't fill out the cost base as they have no idea if you have other accounts that would change the cost base. 


Cheers


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## Eclectic12 (Oct 20, 2010)

Maybe it would be worth your while to plug in your numbers to AdjustedCostBase.ca and save a copy, in case the web site ever shuts down?
https://www.adjustedcostbase.ca/


Cheers


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## undersc0re (Oct 7, 2017)

Took your advice!

It did give me this error, the superficial loss rule may apply for this transaction, on the first sell.

So this is what it spit out, I assume $168.95 would be the proper acb capital gain on that security if that is all the transactions done.


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## Eclectic12 (Oct 20, 2010)

Looks good to me.


Cheers


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