Calculating Your Adjusted Cost Base (ACB)

1. 1. Victor

   If you take a look at historical gas prices in Toronto (http://www.torontogasprices.com/retail_price_chart.aspx) over the last 6 years compared to the price of crude, you will notice a recent divergence in the two trends. To me, this indicates that we can expect a large adjustment jump in the price at the pump. Perhaps we are seeing this already at $1.17/L today. I have read that we can expect to see $1.50/L by summer.

   Even though I consider myself an environmentalist, I have no illusions that most people feel the way I do. I believe people will cut out a lot of luxuries from their lives before reducing the amount they drive. That being said, my question to FT and MDJ readers is what investment opportunities does this offer us? Is investing in oil and gas companies the way to go? Does anyone else benefit directly from rising gas prices?

   Thank you!

   Apr 16th, 2008 @ 10:39 am

2. 2. Hannah

   Great post, this is something people need to know how to do! Great timing, too, as I just finished filing my taxes just this morning (I was waiting on a T4 that didn’t get sent to arrive).

   Apr 16th, 2008 @ 11:00 am

3. 3. Geoff

   Victor,

   The oil trusts are an interesting play in the stock market. Check out Penn West.

   Penn West delivers 34 cents *every month* for each share you own. You might be able to offset your increased pump prices with this baby. Plus as oil rises so will the price of the share. For me, the *monthly* dividends sold me on it.

   Apr 16th, 2008 @ 11:48 am

4. 4. FrugalTrader

   I always hold a portion of my portfolio in energy. Right now, a big chunk of that allocation is in Canadian Oil Sands. (COS.UN).

   Apr 16th, 2008 @ 11:57 am

5. 5. Qubikal

   Thanks for posting on the topic - i was googling on how to calculate ACB, while on the side made my daily visit to the site and killed 2 birds with one visit…

   on a side note - can someone help me on determining my ACB in the event of a spin-off, in the format of a dividend? For example, owning Altria (MO)- spun off Philip Morris International (PM), issuing 1 share as dividend for each share of Altria owned.

   Let’s say for example, i purchased 100 shares of (MO) pre-split at $70. What’s my ACB of the MO shares and the PM shares after spin off?

   Thanks!

   Apr 16th, 2008 @ 1:13 pm

6. 6. JR

   Geoff said

   quote .. “Victor,

   The oil trusts are an interesting play in the stock market. Check out Penn West.

   Penn West delivers 34 cents *every month* for each share you own. You might be able to offset your increased pump prices with this baby. Plus as oil rises so will the price of the share. For me, the *monthly* dividends sold me on it.”

   Geoff, I’d be interested to know how you would protect the investment if the stock price goes down the way it did earlier this year at the beginning of - to the middle of February, or is that of no consequence since PWE keeps paying the same monthly distribution?

   Apr 16th, 2008 @ 6:18 pm

7. 7. Geoff

   JR,

   You bring up a good point. Check out one oil trust, Penn West:

   http://tools.trustweb.ca/acb_001/tools/distributions/?fundid=8

   You’ll notice consistent distributions.

   The way I see it - I see cheap oil as unsustainable. I’m betting against cheap oil in the long run. And under those circumstances what matters in the long run is how much oil you control. “Dollar cost averaging” works for oil trust shares in the same way it works for any other index stock.

   But thats just my bet - we’ll see how it works out ;)

   Apr 16th, 2008 @ 7:23 pm

8. 8. JR

   Geoff, ermmm, OK, two things on trust units, since in PWE or PWT.UN case I looked at the charts over the past twelve months and that concerned me.

   1) they do swing around, and I suppose cost averaging would be one good way to get around any minor swings, that instead of purchasing say 1000 shares all at once, it could be done in several stages over days, weeks months or years to the point of reinvesting the dividends, that is if PWE was one of the preferred choices.

   2) the other concern I have is the distributions, and I know there are no certainties in life, I have seen distributions on some trust units lowered, even vanished.

   But hey, if trust units give the investor the comfort level they need on monthly distributions and can handle any downward swings, then who am I to knock it. My question was what-if the PWE stock dropped below the $30 mark and stayed there

   Apr 16th, 2008 @ 8:12 pm

9. 9. Jared

   I have a question not directly related to this topic, but that someone here can probably answer.

   My question is if you borrow money for investing buy a stock and then sell the stock. How much if any of the money could be taken out without changing the deductibility of the loan..

   So an easy example:
   10K borrowed…
   Buy 10 shares for 1K each.
   Sell 10 shares for 1.5K each 6 months later..

   Can the 5K increase be taken out of the investing account, as long as the 10K is invested in something else without effecting deductibility of the loan?

   Apr 17th, 2008 @ 11:51 am

10. 10. FrugalTrader

    Jared, check out this post:
    http://www.milliondollarjourney.com/key-tax-considerations-on-an-investment-loan.htm

    Apr 17th, 2008 @ 12:04 pm

11. 11. pension

    An interesting and revealing article - thanks for shifting my focus!

    Apr 17th, 2008 @ 2:41 pm

12. 12. paulette

    Thanks for the information.:)

    Apr 19th, 2008 @ 10:50 pm

13. 13. DG

    Thanks for the info, but I have a question:

    What is the ACB *after* you’ve sold some of the shares?

    Thanks,
    Dan.

    May 13th, 2008 @ 11:35 pm

14. 14. FrugalTrader

    DG, here is a table that will step you through the process:
    http://www.fiscalagents.com/newsletter/4abcacb.shtml

    May 14th, 2008 @ 12:37 am

15. 19. amit

    Hello FrugalTrader,

    How do the ACB calculations change when the stock is split? What about Phantom Distributions? Few of my iShares ETFs distributed some phantom distributions earlier this year (Feb 2009) and I am not sure how does my ACB calculation would change due to these. I couldn’t find much information on this except for a website for a company called ACBTracking Inc. that charges $85/- for 10 calculations. Since, I am an individual with just 7 ETFs with no sales, I find it pretty costly to pay $85/- to just calculate my ACB if it’s easier for me to calculate it myself. Hence the questions.

    Thanks,
    - Amit.

    Mar 12th, 2009 @ 5:25 pm

16. 20. Justin

    If I buy and sell one US stock for many years (many times each year) and do not declare tax losses each year because each time I sell I bought some back within 30 days (the superficial loss rule would not allow it), finally in 2008 I sell all the shares and decide to make a tax claim. What would be the ACB?

    I see three options:
    1) convert each transaction into CAD using the spot exchange rate.
    then compute ACB from it.

    2) compute the ACB for each year and convert to CAD using the CRA averaged US$ rate for that year

    3) compute the ACB in US$ for all the previous years and you get a
    capital gain or loss in US$. Then convert it into CAD using the CRA
    averaged US$ rate for 2008 (or the rate on the day it is finally sold).

    1) would be the most accurate. But too complicated if the number of trades is huge.
    2) seems OK.
    3) I am not sure.

    Can anyone comment? Thanks
    Justin

    Apr 5th, 2009 @ 3:14 am

17. 21. Tom

    Buy & Sell Fees.

    Hey Guys,

    I am on a fee base structure @ CIBC - so each year a pay about 1.25% of my portfolio value. This basically includes a bunch of trades and etc.. Anyways,
    my question is: How do you write off the fee on a tax form? Let’s say it cost me $X dollars in trade fees which form do I declare that on? Any tax experts and/or anyone in a similar situation? Any help would be greaaat!

    Apr 6th, 2009 @ 3:38 pm

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