# Tax on ETFs



## jumbalaya (Jan 17, 2013)

how do I do this? I received dividends from ETFs i bought throughout 2014. pretty sure all of them include ROC... how do I split this out? and how does this affect ACB?

and do I have to track the ACB for 20-30 years before I sell the ETFs?

using questrade.

Thanks!


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## Eclectic12 (Oct 20, 2010)

Your broker should provide a T3 form and possibly summaries if more than on ETF is included on the same T3 form.
This will give the capital gains, eligible dividends, etc. for the always taxable amounts.

The ETF web site should provide a breakdown that includes the RoC portion. 
Subtract the RoC portion from your ACB until the ACB is zero (make sure to add in any buys or re-invested payments that increase the ACB).
If the ACB is negative, report the RoC as a capital gain.

http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm
http://howtoinvestonline.blogspot.ca/2010/07/return-of-capital-separating-good-from.html


Cheers


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## james4beach (Nov 15, 2012)

The dividend and interest parts are easy -- right off the T3. (They haven't sent them out). Unfortunately T3's can come pretty darn late in the tax cycle, later than most other tax slips.

What's difficult is the ACB. The ACB is impacted by both return of capital and reinvested distributions. If you have held the shares for the entire year and *have not traded* any shares, you can just use the numbers from the ETF web site breakdown as a yearly total.

However, if you traded any shares or owned them only part of the year, there is trouble: it gets very difficult to track because it requires monthly granularity of calculation.

Luckily, your brokerage -- certainly TD Direct Investing -- does track the ACB. I've found them to be very accurate with ours, so at this point I just use TD's figure as shown in the cost basis column. In other words the broker automatically adjusts the ACB according to return of capital and reinvested distributions.



> and do I have to track the ACB for 20-30 years before I sell the ETFs?


Yeah, and it sucks. It's a really unfortunate thing about ETF ownership in non-registered accounts. Many of us run detailed calculations to check the broker's accounting of the ACB.

I pretty much trust the broker's calculation with occasional spot checks to make sure it looks right.


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## Guban (Jul 5, 2011)

That's one plus for mutual funds. They will track your ACB, and you can call and talk to a person for personalized help. Of course, you pay for this privilege.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... However, if you traded any shares or owned them only part of the year, there is trouble: it gets very difficult to track because it requires monthly granularity of calculation ...


Unless one is missing information (ex. breakdown from the ETF company or re-investment purchase price or missing purchases one made) ... I disagree that it's difficult. The calculation is the same, using simple math - where a spreadsheet or software streamlines the process. 

It is tedious because of the volume and needing to get the timing right for buying new units or having cash distributions automatically buying additional units ... but it isn't rocket science or needing advanced math.

Another twist to watch for are phantom distributions.
http://www.theglobeandmail.com/glob...by-phantom-etf-distributions/article18225076/
http://www.acbtracking.ca/glossary/phantom-distributions


Cheers


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## jumbalaya (Jan 17, 2013)

great replies everyone  i just feel like it's a huge hassle to keep track of it every year... is it possible to hire an accountant when I finally decide to sell in 20-30 years? probably worth it for me lol.

or, can i just trust questrade's calculation of the ACB? i'll let the auditor deal with the mess of verifying, assuming i even get audited? also, where will questrade show the acb for each ETF anyway?

thanks!


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## Eclectic12 (Oct 20, 2010)

... not sure what an accountant would say.

REITs have similar mixes of income streams, with RoC modifying the ACB. I have a couple of them bought out by other companies when I did not know this and several years down the road when I sold, I was trying to do all these same calculations years after the fact and the basic numbers weren't easily available. If doing it yearly is a hassle, doing it after the fact without the full info is a full pain the butt, plus some.

Done yearly, it's more easily managed ... so I woudn't recommend waiting.


Cheers


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## Guban (Jul 5, 2011)

An accountant would likely say ...

Give me the all of your records for buys and sells, and it'll take me a long time to put everything together, and it'll cost you this much.

As Eclectic says, keep the records yourself on a spreadsheet/computer program if you can. Saves a lot of the hassle and cost later.


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## janus10 (Nov 7, 2013)

Eclectic12 said:


> ... but it isn't rocket science


http://www.youtube.com/watch?v=THNPmhBl-8I


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## Guban (Jul 5, 2011)

janus10 said:


> http://www.youtube.com/watch?v=thnpmhbl-8i


lol!


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## fatcat (Nov 11, 2009)

http://www.adjustedcostbase.ca is free and very helpful


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## Getafix (Dec 29, 2014)

Isn't it better to just buy an ETF like HXS that doesn't distribute dividends and save yourself the hassle when filing taxes?


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## Eclectic12 (Oct 20, 2010)

^^^^

To be clear ... it's any form of taxable income such as capital gains, other income, dividends (non-eligible and eligible), RoC in the right circumstances, etc.

Where HXS is what one is looking for, it's track record over the four or so years of it's existence is to not pay any distributions ... so this works from an yearly income tax perspective, as well as cuts down the bookkeeping required for the ACB.

Some love it and some are concerned about the swap structure ... as usual, due diligence is important.


Cheers


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## Brian K (Jan 29, 2011)

It's not that difficult to track yearly when you get the statement from the broker - they show a ROC amount. Just put it in a spreadsheet and keep track of it and keep the forms that you get as backup if CRA wants to see the details.


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## Eclectic12 (Oct 20, 2010)

^^^^

+1 ... once I understood what needed to be done and started gathering the info on a timely basis, it became similar to reconciling a CC statement or balancing a cheque book.

Of course, I have around six or so in a taxable account and don't tend to buy/sell a lot.


Cheers

*PS*

It did cut down on my work a bit when I noticed RioCan had a high amount of their distribution taxed as income and transferred the units in-kind to my TFSA. :biggrin:


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## nathan79 (Feb 21, 2011)

What if your broker doesn't give you a T3 because you got less than $50 in dividends? I held a small amount of ZDV since November and got a total dividend of $6.94. Would the CRA even care if I just claimed the whole amount as eligible dividends? I think most of it is, anyway.


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## AltaRed (Jun 8, 2009)

nathan79 said:


> What if your broker doesn't give you a T3 because you got less than $50 in dividends? I held a small amount of ZDV since November and got a total dividend of $6.94. Would the CRA even care if I just claimed the whole amount as eligible dividends? I think most of it is, anyway.


You go directly to the BlackRock website to find the details of the distributions (though I don't yet see the breakdown in terms of types of income). In your case, you would look at the months you received the distributions. http://www.blackrock.com/ca/individual/en/products/239496/ishares-canadian-select-dividend-index-etf

Note that December has a re-invested portion $0.16135 per unit so you actually received more distribution than you received in cash. I believe the re-invested portion will increase your ACB.


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## nathan79 (Feb 21, 2011)

Thanks... but it's ZDV, not XDV.

I went to the BMO site and found this http://www.etfs.bmo.com/bmo-etfs/distribution?fundId=86809

The tax information at the bottom of the page is blank, so I guess I can't file my taxes until they post that. I can see why people keep ETFs in registered accounts... so much less hassle.


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