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Updated 2mo ago.
Updated 2mo ago.
The adjusted cost base (ACB) is the average cost of your investments, accounting for all purchases, reinvested distributions, and return of capital. It is used to calculate your capital gain or loss when you sell.
You buy 100 units of XEQT.TO at $25 (cost: $2,500), then 50 more units at $28 (cost: $1,400). Your ACB is: ($2,500 + $1,400) ÷ 150 units = $26 per unit.
If you sell all 150 units at $30 each, your capital gain is: ($30 - $26) × 150 = $600. With the 50% inclusion rate, you add $300 to your taxable income.
Note: return of capital distributions (common in ETFs) reduce your ACB, which increases your future capital gain.
The CRA requires you to correctly calculate your ACB when reporting capital gains. In a non-registered account, every purchase changes your ACB. Many Canadian brokers calculate ACB automatically, but it is wise to verify, especially after an account transfer.