1. What is Adjusted Cost Base?

The Adjusted Cost Base (ACB) is a Canadian tax term that represents the average cost of an investment, including all purchase costs and fees. It is used to calculate capital gains or losses when the investment is sold.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• \( Total\ Cost \) — Total purchase price of the shares
• \( Fees \) — Any transaction fees or commissions
• \( Shares \) — Number of shares purchased

Explanation: The ACB represents the average cost per share after accounting for all acquisition costs, which is essential for accurate capital gains calculation.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for Canadian investors to properly report capital gains or losses on their tax returns and avoid overpaying taxes.

4. Using the Calculator

Tips: Enter the total cost in dollars, any transaction fees in dollars, and the number of shares purchased. All values must be valid (cost ≥ 0, fees ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why is ACB important for Canadian investors?
A: ACB determines the cost basis for capital gains calculations. When you sell investments, the difference between selling price and ACB determines your taxable capital gain or loss.

Q2: What costs should be included in ACB?
A: Include all acquisition costs: purchase price, commissions, legal fees, transfer fees, and any other expenses directly related to the purchase.

Q3: How does ACB change with multiple purchases?
A: With multiple purchases, ACB is recalculated as a weighted average of all purchases, including their respective costs and fees.

Q4: Are dividends reinvested included in ACB?
A: Yes, dividends that are reinvested to purchase additional shares increase your ACB for those additional shares.

Q5: What's the difference between ACB and book value?
A: ACB is specifically for tax purposes and includes all costs, while book value may refer to accounting values that can differ for various reasons.