# First year I've had a T5008 and I'm baffled!



## sbrook (Mar 26, 2018)

I have had income from fund pools in a couple of accounts for several years. This is the first year that I've received a T5008 ... first I've HEARD of a T5008!

From what I can make out, I have royally goofed in not reporting gains properly for years ... although it probably won't affect my bottom line of $0 tax but just my sanity.

There are assorted gains reported on the T3, but they don't seem to bear any relation to what I see on the T5008 and I don't understand why.

When I put the numbers into Ufile I find that it's adding the capital gains on the T3 with the gains reported on the T5008. Surely that must mean the gain is potentially taxable twice. Even if I separate out the reported taxable gains on the T3 for say the Canadian dividend income pool, it bears no relation to the gain from the T5008 or the accompanying tax statement.

Can someone explain what might be going on and what the BLEEP I am supposed to be reporting?

Add to that the fact that I'll need to probably go back and correct years gone by! The lack of using any T5008 data is purely because I never had one in the past!


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## sbrook (Mar 26, 2018)

Oh, forgot to mention, some of the fund pools don't have associated capital gains, but include eligible dividends, foreight nonbusiness income and foreigh nonbusines tax paid and then "Other income" WHAAAAA? And finally "Return of Capital" I see nothing like these on the T5008 sales and nothing like it on the monthly statements except "Cost base adjustment" entries!


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## AltaRed (Jun 8, 2009)

The T5008 is a record of the sale of capital assets that results in a taxable cap gains or cap loss. This is information that is used on Schedule 3 (capital gains form in UFile - one entry per capital asset sold). A T5008 does not have to be used to fill in Schedule 3 as you should have been keeping track of your capital asset sales each year and reporting them on annual tax returns. But T5008 should also reflect your own records (except potentially ignore Box 20 Cost Basis that is in the T5008 because it could be inaccurate) and T5008 data is also reported to CRA.

It does NOT duplicate the date that is on T3 and T5 tax slips which mostly ends up on Schedule 4 - Investment Income. Capital gains that is reported on T3 or T5 tax slips is not the same as capital data shown on T5008. The former is from asset sales within mutual funds or ETFs themselves by the money manager, while the latter is from the sale of capital assets by you, e.g. sale of a stock. 

It is unlikely you are off-course in previous years because if you did have capital sales in past years and did not report them, CRA's computers would have already flagged your lack of reporting (inconsistency) and advised you accordingly on your NOA.


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## sbrook (Mar 26, 2018)

Thanks for the info .. . it has helped at least somewhat but ...

I don't quite understand why the capital gain from internal transactions within the fund are different from the transactions outside the fund, since those gains within will increase the value of the fund and withdrawn eventually and then be taxed as a capital gain then ... hence the same money will be taxed twice!

Fortunately, the Fund reporting has kept track of the average cost ... otherwise I'll have many years of spreadsheet and transactions to go through! I will have to double check it for a couple of funds because the same funds are being traded in two separate accounts.

I figured that since I haven't had requests from CRA for the info that I'm ok at least partly. I shall be away all of April, so I figure I'll have to provide several years worth of reporting to deal with this when I get back in May just to prevent "you haven't reported to us" penalties which they tried to do with some people from what I've read! (some of the penalties were forgiven when there was no tax to pay)


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## AltaRed (Jun 8, 2009)

sbrook said:


> I don't quite understand why the capital gain from internal transactions within the fund are different from the transactions outside the fund, since those gains within will increase the value of the fund and withdrawn eventually and then be taxed as a capital gain then ... hence the same money will be taxed twice!


Rest assured they are not taxed twice. Capital gains within the fund happen because the fund has sold something at a capital gain. By the end of the year, the 'fund' may have purchased and sold dozens of securities, some of which have cap gains and some of with have capital losses, with the net aggregate of all that potentially having capital gains which, because of a Trust business structure, has to be passed through to the unitholder. The NAV of the units decreases by the amount those cap gains are passed through to the unitholder on the day those cap gains are distributed.

Now if you decide to sell some of the fund units, those cap gains are no longer part of the fund and you now pay cap gains only on the change in NAV of the fund from the day you bought the fund units.....to the NAV on the day that you sold the fund units. Your cap gain reflects the 'unrealized capital gains from the remaining holdings in the fund. Trust me... .there is no double taxation. There are articles on the Internet on this exact subject.

And yes indeed, if you hold exactly the same fund in two or more taxable accounts, the ACBs must be combined.


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## sbrook (Mar 26, 2018)

Thank you Alta Red ... I think I can see how that will not be taxed twice. It's a shame that the fund issuers didn't have a proper guide. I know they don't want to give tax advice ... but this is a pretty mechanical process without a lot of "advice" for fund investors. 

The big fun part is that mine's a managed portfolio of a mixture of funds depending on your investment goals and tolerances, so we are at an extra level of blindness compared with just a mutual fund! So when push comes to shove I don't know that the fund is the same set of investments with every purchase and redemption!

I notice that there is a LOT of misinformation ... some sites say only use the one form that is most beneficial for you ... I saw one from a CPA with that recommendation! It seems that this is something that needs to be cleared up 

Oh and one more thing, I presume that the funds used to withdrawing to pay management fees then reinvesting dividends etc a few weeks later are all considered superficial loss rule applied?


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## AltaRed (Jun 8, 2009)

Fund management fees are all paid from within the fund. Distributions are net of management fees. Any re-invested distributions are purchased at the NAV that exists post-distribution. There is no superficial loss.

But if you are talking about 'managed portfolio fees' that are a separate line item on your statements, then those costs are simply investment expenses to include on line 221 I think each year, and which serve to reduce your investment income.


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## james4beach (Nov 15, 2012)

These T5008's are brutal to work through. I've been working on gain/loss calculations all night (boy do I miss my TFSA). I really think it's best to maintain your own spreadsheet for the summary of positions and each one's gain or loss. None of these information slips is going to help create this, definitely NOT automatically. Here is the process I have been using:

1. maintain your own master spreadsheet and track the gain/loss yourself
2. grab your broker's gain/loss summary, and use it to check your records - *this is a great document*
3. finally glance at the T5008 and make sure your records haven't missed anything
4. enter the Schedule 3 information from your master spreadsheet

I basically ignore the T5008 except to check my existing records as a final step. If I get audited, my own master spreadsheet is going to clarify everything, and everything else is just supporting documentation for it.

I think a person could go insane if they were to _start from_ (rather than end with) the T5008 and somehow try to create all capital gain/loss from this.


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## Nerd Investor (Nov 3, 2015)

I ignore T5008s completely and just use gain/loss reports + my own tracking.


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## gardner (Feb 13, 2014)

Nerd Investor said:


> I ignore T5008s completely and just use gain/loss reports + my own tracking.


For the most part, this is my approach. But it is useful to go over the T5008 and make sure that my own records account for all of the material trades on the T5008.
For me, the T5008 uses incorrect ACBs in many cases, and is cluttered with HISA transactions (that aren't capital transactions at all). You can't actually use it except as a checklist against your own tracking.

But it goes to the CRA, so I think it is wise to look it over and make sure that any discrepancies between it and what you report are readily supported by your record keeping.


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## OnlyMyOpinion (Sep 1, 2013)

james4beach said:


> 2. grab your broker's gain/loss summary, and use it to check your records - *this is a great document*


Good summary James. I agree that you need to understand and reconcile your numbers with the broker's records, but I don't agree that the broker's summary is necessarily a 'great' document. Particularly TD's "Realized Gains and Losses (CAD)" summary in their new "TaxPack". It is incomplete and incorrect, particularly wrt strip bonds. 
TD is doing a disservice to their clients by sending out this long-winded, ill-conceived package. Some will rely on it (wrongly), the rest of us have to reconcile it's errors. We will have a hell of a mess if it ever makes its way to the CRA and gains traction with them.


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## AltaRed (Jun 8, 2009)

Only true tax slips, plus the T5008, end up in CRA's hands. What we have to hope is that the Cost Base data box remains empty.


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## fatcat (Nov 11, 2009)

still free and works great https://www.adjustedcostbase.ca/


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## sbrook (Mar 26, 2018)

Now the confusion comes when I'm doing the ACB calculations ...

For example ... My transaction records for one pool looks like this

Security Date Transaction Amnt Shares	Amount/Share	Commission	Capital Gain (Loss)	Share Balance	Change in ACB	New ACB	New ACB/Share	

SHORT TERM BOND POOL	2017-Jul-31	Buy	$8.84	0.8691	$10.17	-	- 450.5047	+$8.84	$4,691.52	$10.41	
SHORT TERM BOND POOL	2017-Jul-28	Sell	$810.00	79.4959	$10.19	-	($17.90)	449.6356	—$827.90	$4,682.68	$10.41	
SHORT TERM BOND POOL	2017-Jul-12	Sell	$57.07	5.5926	$10.20	-	($1.17)	529.1315	—$58.24	$5,510.58	$10.41	

So, the entry on Jul 12 was a sale to pay the fund manager. Then the sale on 28 July was a withdrawal. Then the buy was a reinvestment of dividends / interest.

adjustedcostbase.ca says that the losses associated with the two sales are possibly superficial loss and gives me a box to tick. I know that it essentially dismisses the loss so can't claim it as a capital loss and then it does SOMETHING to the ACB. I understand what triggers this as a superficial loss - buying and selling close together in time making it look like a technical manipulation rather than a longer term investment.

How does this actually affect the ACB?


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## AltaRed (Jun 8, 2009)

The purchase on July 31 due to an automatic re-invested distribution (DRIP) plan does not create potential superficial losses on the prior 2 sells.... despite what www.adjustedcostbase.ca might say.

Sales never change ACB on an ACB/share basis (only on an absolute dollar basis). The absolute ACB comes down of course, but there is also less shares, so ACB/share does not change.

The purchase of new units on July 31 'should' change ACB/share but may not depending on rounding, the number and cost of the new re-invested units relative to the number and ACB/share of the existing units.

July 28 - you have 449.6356 units and an ACB of $4682.68 which is *$10.414388* per share (4692.68 divided by 449.6356)
July 31 - you added $8.84 to the cost base by buying 0.8691 shares at $10.17 per share. Total ACB is now $4691.52 (4682.68 + 8.84) and total number of shares is 450.5047 (449.6356 +0.8691).
ACB is now $4691.52 divided by 450.5047 = *$10.41392*

Your statement rounded ACB/share to only 2 decimal places. So it actually changed, but only at the 3rd decimal place.


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## sbrook (Mar 26, 2018)

Alta Red ... again my thanks ... and that springs up just one more question! This should take care of everything  I have a far better grasp of what's going on now!

There's nothing in the plan documentation to suggest that it's a DRIP but I have no say (I presume it's the portfolio manager to whom I'm paying big bucks!) so I am going to presume that's the case  From time to time there are redistributions within the same Account done by the fund manager to maintain the balance of the content at a $ level ... it's done by a sale from Pool A in the portfolio and buys the same $ value in Pool B and or C. Are those capable of the supeficial loss on the sale from pool A? Since they are done in the same month as purchases by DRIP.

What is of course frustrating about this is that for all the years I've had these plans I haven't had any tax to pay (in fact most years they owed me!), still all that should change next year with OAS and pensions from Canada and abroad about to start when I get the crazy proof of residence stuff that Service Canada wants!!! So I will be all ready to deal with this when this money starts coming in (and yes, I've delayed taking pensions to earn more!)


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## AltaRed (Jun 8, 2009)

I don't know how these Managed Portfolios work but the Portfolio Managers from the likes of the big bank asset management groups likely get it 'right' with respect to avoiding superficial losses. I really don't know. 

IIRC, my brother is in a RBC Managed Payout portfolio and all I know is that they provide him with all the data necessary to put in the tax returns, including Schedule 3 cap gains/losses data. I've not heard him complain about confusing data so I assume it is all laid out for him.


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## OhGreatGuru (May 24, 2009)

AltaRed said:


> ... It does NOT duplicate the data that is on T3 and T5 tax slips which mostly ends up on Schedule 4 - Investment Income. ....


The capital gains reported on a T5 or T3 is added to Schedule 3, at Lines 174 or 176 as applicable. Depending on the type of fund, most of the income on a particular T3 or T5 may be capital gains. But otherwise AltRed's post is accurate.


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## AltaRed (Jun 8, 2009)

OhGreatGuru said:


> The capital gains reported on a T5 or T3 is added to Schedule 3, at Lines 174 or 176 as applicable.


Yes, I should have known that... Was not thinking deep enough from the other stuff that goes on Schedule 4.


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## Beaverbrook (Apr 2, 2020)

AltaRed said:


> Rest assured they are not taxed twice. Capital gains within the fund happen because the fund has sold something at a capital gain. By the end of the year, the 'fund' may have purchased and sold dozens of securities, some of which have cap gains and some of with have capital losses, with the net aggregate of all that potentially having capital gains which, because of a Trust business structure, has to be passed through to the unitholder. The NAV of the units decreases by the amount those cap gains are passed through to the unitholder on the day those cap gains are distributed.
> 
> Now if you decide to sell some of the fund units, those cap gains are no longer part of the fund and you now pay cap gains only on the change in NAV of the fund from the day you bought the fund units.....to the NAV on the day that you sold the fund units. Your cap gain reflects the 'unrealized capital gains from the remaining holdings in the fund. Trust me... .there is no double taxation. There are articles on the Internet on this exact subject.
> 
> ...


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## like_to_retire (Oct 9, 2016)

Beaverbrook said:


> So, let's say I invested $100,000 in a mutual fund on Jan. 1. On Dec. 31, there is a balance of $100,000, ie. zero return on the investment. I then "cash out" on Dec. 31 as well. I would think then I'd have a zero capital gain and have no tax payable on the cash out. But, in March I get a T3 or T5 that shows $2,000 worth of capital gains within the fund. I must now report that as income on my return and pay tax on it. Let's say that's $750. So, no roi, no income. Yet, I still have to pay out $750 to the CRA. So, did I actually have a capital loss when I cashed out then, even though my balance didn't change? This is hard to get my head around.



You won't pay tax because you would have increased your (cost base) ACB equal to the amount of the reinvested distribution.

ltr


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## agent99 (Sep 11, 2013)

james4beach said:


> I basically ignore the T5008 except to check my existing records as a final step. If I get audited, my own master spreadsheet is going to clarify everything, and everything else is just supporting documentation for it.


Same here. I just use the T5008 to cross check that I have not missed anything. 
I use my own acb numbers. Even brokerage acbs are at times inaccurate. Partly because of transfers in and out from another brokerage at one time. Haven't checked how they compare lately - something for me to do.... 

However, not everyone is adept at spreadsheets. I see some use some on-line sites for acb calculation. Maybe some rely on tax preparers? Others use their brokerage numbers? Can't imagine that investors as a whole handle acbs very well?


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## Eclectic12 (Oct 20, 2010)

sbrook said:


> Thank you Alta Red ... I think I can see how that will not be taxed twice. It's a shame that the fund issuers didn't have a proper guide. I know they don't want to give tax advice ...


On one hand, I feel your pain as years ago I discovered the REITs and income trusts I'd bought paid mixed income instead of all eligible dividends. In some cases, the trust had been bought out so getting the info I needed was painful!

On the other hand ... maybe it's the way the internet and articles are slicing/dicing particular topics that is letting people lose sight of the forest for the trees?

When I started in the '90's, I read a chapter on investment taxes in a tax book and skimmed some investment books' chapter on the same subject. That some income including possibly capital gains was taxed each year and then there could be capital gains when selling (plus the need to track the adjusted cost base) was clearly spelled out.

The increasing amounts of info on broker statements/tax forms are what's changed over the years.

FWIW ... when there were posts about T5008 slips with boxes on them, like a T4/T4/T5 slip years ago on CMF, I was sure I hadn't receive a T5008 either. When I check my records, what the broker labelled "Annual Trading Summary" in big, bold text had a quiet, smaller bit under it "T5008". I'd been receiving the T5008 for years it turned out.




sbrook said:


> ... The big fun part is that mine's a managed portfolio of a mixture of funds depending on your investment goals and tolerances, so we are at an extra level of blindness compared with just a mutual fund! So when push comes to shove I don't know that the fund is the same set of investments with every purchase and redemption!


The reports with the transactions don't give some sort of unique identifier for the investment?

Keep in mind that what the investment itself likely is more likely to matter for what income to report that tax year versus changing your ACB that would matter when selling. Unless it pays return of capital (RoC) or a re-invested capital distribution.




sbrook said:


> ... I notice that there is a LOT of misinformation ... some sites say only use the one form that is most beneficial for you ... I saw one from a CPA with that recommendation! It seems that this is something that needs to be cleared up


I haven't noticed this ... more that a part like ACB or the CG/calculation without mentioning how it goes on the tax form etc.

Good that you caught the mistake but it shows that one should check multiple sources and find trustworthy ones!! I've seen some get confused by trying to apply the US capital gains tax rules to Canada ... which is also a mistake.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> These T5008's are brutal to work through. I've been working on gain/loss calculations all night (boy do I miss my TFSA). I really think it's best to maintain your own spreadsheet for the summary of positions and each one's gain or loss ...


I'm all for using whatever one likes to keep track of the ACB as it happens (e.g. spreadsheet, Adjusted Cost Base.ca - The Free and Easy Way to Calculate ACB and and Track Capital Gains or whatever).

I am puzzled as to where the problems are coming in.

In the past couple of years, I have had some sales on T5008 forms that don't include a cost base. The T5008 sped up my process as it let me know what day and month of the year to check for the transactions. The numbers off the monthly statement were +/- one cent of what the statement transaction was.

I see posts that this year's T5008 from my broker is including a box for cost base but had no sales in a NR account last year. The tax package provided in the last couple of years had a cost base that when checked against the monthly statement, was again within a cent. I expect that the cost base now being included on the T5008 will be fine.

Note that I haven't done anything funky that cases problems with the cost base like holding the same investment in multiple NR accounts or transfers from a CAD NR account to a USD NR account.





james4beach said:


> ...
> 2. grab your broker's gain/loss summary, and use it to check your records - *this is a great document*
> 3. finally glance at the T5008 and make sure your records haven't missed anything


Odd because when I've received these two, the numbers have been the same for me so it's six of one or half dozen of the other as to which to use.




james4beach said:


> ...I think a person could go insane if they were to _start from_ (rather than end with) the T5008 and somehow try to create all capital gain/loss from this.


As I say ... starting with it speeds up my process as it gives what monthly statement to verify numbers against.

Of course, I've already got the CG calculated in my cost base spreadsheet most of the time as columns calculate it and I'm typically recording the proceeds, as the sale is made.


Cheers


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## like_to_retire (Oct 9, 2016)

I remember when I use to have ETF's and made a sale through the year, I always had to remember at year end to look up the breakdown of the distributions I had received in that year before the sale. The company (i.e. Blackrock, etc) didn't publish the distribution breakdowns until the end of December, so you never know your true cost base for your records until year end.


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## AltaRed (Jun 8, 2009)

Deleted


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## agent99 (Sep 11, 2013)

FWIW, nothing is included in box 20 on any of the T5008s that we received from BMOIL.


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