Dear visitor,

Thanks for dropping by.

Last week, I was browsing through the Canadian Mustachians on Facebook and came across the term"Adjusted cost Base".

What the heck is it? I never heard of it before, and since I haven't sold any of the shares I invested, never had to use it too.

Being a DIY investor, you learn all the time. That is a lifestyle thing, I guess.

So, what is Adjusted Cost Base, or in short ACB?

In short it is the average cost of the shares you earned.

Ok, I will tell you what I know now.

Think that I bought 10 shares of the Royal bank, with $50 each. Now the total price of the 10 shares is $500. simple math, right?

I gave $7 for the bank to do the trade. So, my total cost of purchase is $507, right?

So what the actual cost per share? 507/10 =$50.7, so far good, right?

aslo assume that it happened in June 2016.

Then I decided to buy another 10 shares of Royal bank in July 2016 for the price of $55 a share. Now the total cost for that purchase is $550 plus the trading fee $7 , ie.$557. Now I have 20 shares. So what is the average cost or Adjusted cost of these shares? (Adding $507 and $557 will be $1064 and divide that by 20, (the total number of shares now I have.) It will be $53.20

Now if I am selling 5 shares for the price of $65, so what will be the adjusted cost base of this sale?

(65*5)-7 = $318/5 =$63.60.

When I am reporting capital gains, I will be using this information.

What was the cost of purchase of those 5 shares? I will be calculating that using my ACB.

ie, 5shares time $53.20 =$266

My sales income = 5*$63.60= $318

Capital gain to be reported = $318-$266=$52.

I will end up in paying capital gain tax on $52.

Now, I am working on to make a spreadsheet to calculate ACB for all my investments.

Thanks for dropping by.

Last week, I was browsing through the Canadian Mustachians on Facebook and came across the term"Adjusted cost Base".

What the heck is it? I never heard of it before, and since I haven't sold any of the shares I invested, never had to use it too.

Being a DIY investor, you learn all the time. That is a lifestyle thing, I guess.

So, what is Adjusted Cost Base, or in short ACB?

In short it is the average cost of the shares you earned.

Ok, I will tell you what I know now.

Think that I bought 10 shares of the Royal bank, with $50 each. Now the total price of the 10 shares is $500. simple math, right?

I gave $7 for the bank to do the trade. So, my total cost of purchase is $507, right?

So what the actual cost per share? 507/10 =$50.7, so far good, right?

aslo assume that it happened in June 2016.

Then I decided to buy another 10 shares of Royal bank in July 2016 for the price of $55 a share. Now the total cost for that purchase is $550 plus the trading fee $7 , ie.$557. Now I have 20 shares. So what is the average cost or Adjusted cost of these shares? (Adding $507 and $557 will be $1064 and divide that by 20, (the total number of shares now I have.) It will be $53.20

Now if I am selling 5 shares for the price of $65, so what will be the adjusted cost base of this sale?

(65*5)-7 = $318/5 =$63.60.

When I am reporting capital gains, I will be using this information.

What was the cost of purchase of those 5 shares? I will be calculating that using my ACB.

ie, 5shares time $53.20 =$266

My sales income = 5*$63.60= $318

Capital gain to be reported = $318-$266=$52.

I will end up in paying capital gain tax on $52.

Now, I am working on to make a spreadsheet to calculate ACB for all my investments.

Too much for my tiny brain to comprehend! But it looks like YOU know what you're talking about :)

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