Encana Spinoff And The ACB?

by Tax Guy - Burlington Accountant on February 26, 2010 Print This Post Print This Post

Are you trying to figure out your adjusted cost base (ACB) after Encana split off into Encana and Cenovus?

Encana spun off a portion of its business into a new company called Cenovus last year. If you owned shares of Encana prior to the split, you would have received one share of Cenovus for every share of Encana you held.

Tax Deferred Rollover

The split into two separate companies did not result in a tax event. That is to say that you would not have had a taxable capital gain or loss on the spin-off. Your overall cost base remains the same between the two companies, but the question is what part of the adjusted cost base gets allocated to the new Encana and to the new Cenovus shares.

The Allocation of ACB

The ACB is allocated between the two shares based on share values on the date of the split (November 30, 2009). The allocation of your old Encana ACB may be split as follows:

  • 51.5% To the new Encana, and
  • 48.5 To Cenovus

Example Of The Split of ACB

Say you bought 100 shares Encana several years ago for $10 per share. Following the split, you will have 100 shares of Encana and 100 shares of Cenovus. The adjusted cost base of each would be:

  • Encana = $515 (or $5.15/share)
  • Cenovus = $485 (or $4.85/share)

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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