# Confused about Box 42 on T3 slips...



## Sixth_Circle (Nov 22, 2010)

Ok, so I have several T3 slips with amounts printed for Box 42. Some values are positive, some are negative.

In previous years, apparently the tax software I use did not have a place to enter this value and their Help page still says that the box was for informational purposes only and not required to complete the return. The rest of that page, and the CRA guide, describes a bunch of mumbo-jumbo about ACB calculations and other complex concepts that just hurt my head. 

But this year there _is_ a box to enter these values for each T3. The only question is, if I enter these values does the software do what must be done to them? Aside from plugging in the numbers and answering the questions, is there anything _outside_ of the software that I need to do?

Thanks for any help.


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## dogleg (Feb 5, 2010)

Sixth...: See Suban's CRA web page in the next topic panel. I had the issue of figuring out the loss or gain for a mutual fund sale my wife had . Evidently you don't need the date of fund purchase or the unit price at that point. As I understand it all the necessary data is updated on the T3 each year which reflects the ACB and if there is a sale of units the book value is compared to the unit sale value for that time. So if there is a realized gain you take 50% of that and pay capital gains tax on that amount. My head hurts too so I will let my accountant figure it all out. Whoever designed the income tax forms and rules should be waterboarded to start with then placed in stocks in the town square.


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## AltaRed (Jun 8, 2009)

Box 42 on a T3 slip is Return of Capital and is provided to you by the Trust (mutual fund, REIT, ETF, etc) so that YOU use the information to reduce your ACB of your invested capital for that investment in your personal records. No one else takes a responsiblity to keep accurate records of your ACB of your investments. Box 42 information can be entered into your tax software but has no effect on your tax return of that year. However, it is important for you to keep an accurate record of your ACB for each investment so that when it comes time to sell your investment, you are correctly reporting capital gains (or losses) to the CRA on Schedule 3. You may have to adjust the ACB of your investment every year if there is ROC on your T3 slip every year. If you keep your investment for 20 years, you will have to have your ACB records for that investment over that entire period of time.


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## Sixth_Circle (Nov 22, 2010)

Thanks...I'm probably in over my head. Please bear with me while I think out loud and try to wrap my head around what is required. We have several T3s for ETFs held in our joint non-registered account, all of which just park any dividends/distributions in the cash portion of the account for eventual reinvestment.

So far as I can tell from looking at our 2012 statements, there were only two selling transactions. Are selling transactions all I need for the purposes of the return at hand? Do I just go back to when the shares were first purchased, calculate ACB, etc? 

I also keep seeing referrals to trading fees being used in some examples. We have a financial advisor who manages our portfolio, and it is fee-based so there are no clear transaction or trading fees, just a monthly deduction based on the account value. Having a portfolio manager means I don't really pay attention to the granular details of buying/selling; we agreed on a balancing strategy and now we just keep a bird's eye view.

Sorry for dumb questions, just trying to learn.


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## AltaRed (Jun 8, 2009)

There are 2 separate topics/issues here. First, there is the T3 tax slip in which IF there is an amount in Box 42, that is an adjustment to the ACB of that investment. You keep track of that for each ETF each year (regardless of whether you holld or sell the ETF). That is to keep track of the correct 'book value' / ACB.

When you sell an investment, you have to calculate your cap gains (or loss) on that investment (Schedule 3 of the tax return) by subtracting the (adjusted) ACB from the selling price, where adjusted ACB = your original purchase price of the ETF less any annual adjustments for Box 42 ROC data for that investment. For people who do not have a fee based financial advisor, you would have added the purchase commission to the ACB as well for the adjusted/adjusted ACB. Then there would normally be a selling commission which you note on Schedule 3 in the box provided.

Example: Purchase ETF in 2005 for $5000. Commission to purchase $10. ACB = $5010. But let's also say there were Box 42 ROC adjustements on the T3s for this ETF in 2008 of $100, and one in 2010 for another $200. ACB today at time of selling is $5010-100-200 = $4710. That is what goes in the line for 'cost'. 

I don't know how your financial advisor manages your portfolio but IF it is strictly a % of value, e.g. 1.25% on an annual basis and you deduct that as an expense item on your tax return each year, and there are no 'extras' specifically listed for buying and selling commissions, then you would not have a purchase commission and your ACB would not be adjusted for that. Similarly on sales, you would have no selling costs.


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## Sixth_Circle (Nov 22, 2010)

AltaRed said:


> When you sell an investment, you have to calculate your cap gains (or loss) on that investment (Schedule 3 of the tax return) by subtracting the (adjusted) ACB from the selling price, where adjusted ACB = your original purchase price of the ETF less any annual adjustments for Box 42 ROC data for that investment. For people who do not have a fee based financial advisor, you would have added the purchase commission to the ACB as well for the adjusted/adjusted ACB. Then there would normally be a selling commission which you note on Schedule 3 in the box provided.
> 
> Example: Purchase ETF in 2005 for $5000. Commission to purchase $10. ACB = $5010. But let's also say there were Box 42 ROC adjustements on the T3s for this ETF in 2008 of $100, and one in 2010 for another $200. ACB today at time of selling is $5010-100-200 = $4710. That is what goes in the line for 'cost'.


Thank you, it is becoming much clearer.



> I don't know how your financial advisor manages your portfolio but IF it is strictly a % of value, e.g. 1.25% on an annual basis and you deduct that as an expense item on your tax return each year, and there are no 'extras' specifically listed for buying and selling commissions, then you would not have a purchase commission and your ACB would not be adjusted for that. Similarly on sales, you would have no selling costs.


Yes, it is strictly fee-based as annual percentage, no extra commissions or trading fees. They provided us with a list of eligible fees that we can claim.

Much appreciated


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