Question:
- I bought 100 shares of xx on day 1 for $10.
- I bought 100 shares of xx on day 2 for $5.
- I sold 100 xx on day 3 for $2.
Can the sale be against the $10 stock, i.e. a loss of $8/share? Alternatively, must it be against the average of $7.5/share?
What is a Capital Gain?
Simply stated, the gain or loss on the sale of a share is the proceeds of disposition less the adjusted cost base or ACB. For tax purposes, the taxable portion of a gain or loss is 1/2 of the gain or loss.
Proceeds of Disposition (Proceeds of The Stock Sale)
The proceeds of disposition is simply the amount you received from selling a stock, bond or mutual fund. Deduct any commissions paid to the broker to arrive at new proceeds of disposition.
Adjusted Cost Base
The adjusted cost base is the price you originally paid for the stock or other investment, less any commission paid to your broker, and less any return of capital (you may run into return of capital with certain mutual funds).
When you have purchased the same shares over a period of time and then sell a portion of your holdings you must use the average adjusted cost base per share. In the information provided,
The total adjusted cost base before the sale:
$1,500 = (100 x $10) + (100 x$5)
And your average adjusted cost base per share is:
$7.50 = ($1,500 / 200)
When you sell your 100 shares on day 3 for $2 each you will have a loss of:
$550 = 100 x ($2.00 – $7.50). Of this loss only $275.00 may be claimed as a capital loss for tax purposes.
The loss is then calculated against the average.
Superficial Losses
While the topic here is calculating the adjusted cost base of multiple purchases of securities it is important to remind you about superficial losses (also called stop losses).
If the same stock or investment was purchased 30 days before or after a sale, any losses are denied. The amount of the loss is added to the cost of re-acquired shares. Similarly, if you sell your shares and your spouse re-purchases the investment the loss will still be denied.
(Thanks to DK for pointing out the importance of this!)
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I purchased stock of a company x at $ 2.40 per share 2 years ago. The company stopped tarding on June 9th this year at 40 cents and I have been unable to sell this stock.
Is there a way to claim a cap[ital loss for this?
Thanks
Sam
Sam,
Of the company is bankrupt, then you can claim a loss. See http://blog.taxresource.ca/claiming-losses-on-bankrupt-stocks/
Rookie question: I’m in the 100K income bracket; brought some stock for .22 and plan to sell soon now that it’s over $1. What portion do I need to keep to cover my tax obligations?
Dan,
The calculation would be:
($1.00 – $0.22) x # of shares sold x 50% x your marginal tax rate. I’m not sure what province you are in so, I would suggest 45% as a marginal tax rate.
Look at http://www.walterharder.ca/MarginalTaxRateCalculator.asp to figure your MTR.
Hello.
Need one consider purchases of shares for a given company made within a TFSA and an external account. For example:
I bought 100 shares of company A @ $5.00 on Jan 1 in my non TFSA account
I bought 100 shares of company A @ $2.00 on Jun 1 in my TFSA account
I sold 100 shares of company A @ $1.00 on Sep from my non-TFSA account.
How would I calculate the loss?
Thanks.
The TFSA transitions are irrelevant with one exception. A loss from the sale is a share in a non-registered account that is repurchased in the registered account within 30 days before or after the non-registered disposition.
In all cases the TFSA transitions have no impact on ACB: hence “Tax Free” savings account.
In theses transitions the TFSA transitions are not relevant.
Complete noob here. So the institution doesn’t provide a T3 or T5 or some slip for stock gains? This must be done by the individual investor?
Capital gains will not appear a on tax slip.
Hi there,
Why do I need to use Bank of Canada’s rate? I thought the bank gave you the rate when you purchased the stocks.
My situation is I have 100k in my investment account, and I had had serveral transaction in different time. When I purchased the stock, the bank sold me a rate for USD from CAD, then when I sold the stock and converted to CAD, they gave me a bad rate too. Which rate I should go with? The actual transaction or the bank of canada rate?
please advise!! Thanks so much.
Hello:
My question is how to calculate the ACB when you purchase a number of shares and sell through out the same year. Ex. Jan buy xxx 850.000 units @ 5.78/unit =5,7800. May Sell xxx 250.00 units @ 14.9600/unit ACB 5.921. Sept. Sell 250.00 units @ 28.790/unit ACB 2.363. Now this is where I get stuck calculating the ACB. I keep coming up with ACB -16.085. Not sure what to do. The remaining 350.00 share are sold in another year.
Thank You.
I’m not entirely sure how one can purchase 850 units at $5.78 and somehow the average ACB somehow changes? Perhaps the fund did some distributions and reinvestments. This would increase the cost base and number of units.
Buy 850 units at 5.78 = $4913.
The ACB is $4913
The sell in May:
POD = 14.96 x 250 = $3,740.
ACB = $4913/850 x 250 = $1,445.
Gain = $2,295
The remaining ACB after the sell is $4,913 – $1,445 = $3,468
And there are 600 units remaining (Average ACB is $5.78)
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