1. What is Adjusted Cost Base (ACB)?

The Adjusted Cost Base (ACB) is a tax term used to calculate the capital gain or loss when you dispose of capital property. It represents the actual cost of an investment after accounting for various adjustments over the holding period.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• Original Cost — Initial purchase price of the asset
• Acquisition Costs — Additional costs incurred to acquire the asset (legal fees, commissions, etc.)
• Proceeds from Disposition — Amount received from selling or disposing of the asset

Explanation: The ACB calculation helps determine the true cost basis of an investment for tax purposes, which is essential for accurate capital gains reporting.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for determining capital gains tax liability. It ensures proper reporting to tax authorities and helps investors understand their true investment performance after accounting for all costs.

4. Using the Calculator

Tips: Enter all amounts in dollars. Include all relevant acquisition costs such as brokerage fees, legal expenses, and other direct costs associated with purchasing the asset. Proceeds should reflect the net amount received from disposition.

5. Frequently Asked Questions (FAQ)

Q1: What types of costs are included in acquisition costs?
A: Acquisition costs include brokerage commissions, legal fees, transfer taxes, and any other direct costs necessary to complete the purchase of the asset.

Q2: How does ACB affect capital gains tax?
A: Capital gain = Proceeds from disposition - ACB. A lower ACB results in higher capital gains and potentially higher taxes, while a higher ACB reduces taxable gains.

Q3: Can ACB be negative?
A: While theoretically possible if proceeds exceed total costs, this would indicate an error in calculation as ACB represents the net cost basis of an investment.

Q4: How is ACB different from book value?
A: ACB is used for tax purposes and follows specific tax rules, while book value is used in accounting and may include depreciation and other adjustments not recognized for tax purposes.

Q5: Do I need to track ACB for all investments?
A: Yes, you should maintain accurate ACB records for all capital property investments to ensure proper tax reporting when you eventually dispose of the assets.