Calculating capital gain

[DrXenon]

I transferred some stock between brokers and sold half of it yesterday. I am trying to figure out what my capital gain is. I bought the stock $500 at a time every 2 weeks over the course of 2 years, so there are about 50 transactions at the original broker. The broker I bought the stock with did not transmit an average cost to the new broker, so the new broker is indicating ??? in the cost basis column.

How do I go about calculating my capital gain on the 50% of the stock I sold, for CRA purposes? Is it "first-in-first-out"?

[S5]

Is it "first-in-first-out"?

No such thing in Canada. You need to calculate your adjusted cost base. It's a PITA. Do a google search for ACB, there are spreadsheets that will help. Never trust your broker's ACB calc to be accurate.

[ccyk]

you have to do it manually i guess.
it is easier if you have never sold any in the old broker. just add total of money used to buy that share
$500*number of times of purchase
average cost/share is $500*number of times of purchase / number of shares

[SkimGuy]

Probably use excel for this and all future ACB calculations. It's tedious and that's why most people recommend DRIPs/PAPs for registered accounts so you don't have to worry about calculating taxable gains on a constantly fluctuating ACB.

[DrXenon]

Oh great, there are a whole bunch of reinvested dividends that need to be accounted for as well. This is going to consume Saturday afternoon, I can see it coming.

[S5]

Oh great, there are a whole bunch of reinvested dividends that need to be accounted for as well. This is going to consume Saturday afternoon, I can see it coming.

Well, you have until April 30th 2013 to figure it out.;)

Here's Canadian Capitalist's ACB spreadsheet and blog post. http://www.canadiancapitalist.com/free-acb-capital-gains-tracker-in-excel/

[brunes]

I have an even more complicated situation I think....

I have stocks purchased through an employee purchase plan. Every two weeks I have 10% of my pay taken and allocated to purchase company stock, which is then done at a 5% discount to the current share price. However, this stock is listed on a US exchange, and I am paid in Canadian... so there is also a currency conversion at play, every two weeks. Also there is income tax taken out of my pay whenever this happens on the 5% benefit.

Furthermore, these stocks were held at a US broker. I transferred them to my TD Waterhouse account, so now they all have a "book value" of N/A. Also, these stocks paid dividends... but I took them in cash, into my US bank account.

Now,when I go sell them - how do I calculate the capital gain for this? Do you calculate the ACB AFTER the 5% discount, or before? Also do you have calculate the ACB at the US/CAD date for that buying period? Or is it based on the time the shares were transferred into TD waterhouse? What about the dividends...

[S5]

Now,when I go sell them - how do I calculate the capital gain for this? Do you calculate the ACB AFTER the 5% discount, or before? Also do you have calculate the ACB at the US/CAD date for that buying period? Or is it based on the time the shares were transferred into TD waterhouse? What about the dividends...

Is it a Canadian or American company?

Your ACB is based on what you actually paid so after discount. Edit:see FS22's post below for a correction on how to calculate ACB when a taxable benefit is involved.

The currency conversion can be calculated either with the official rate that day or you can use the average rate for the year. These rates are available from the BOC website. The important part is that you remain consistent in your use of rates. Picking whichever rate is most favourable to you is fine if it's your first time doing calculations involving currency conversion but switching back and forth between methods will likely lead to issues with CRA.

The transfer to TDW has no impact on these calcs. Dividends shouldn't affect ACB unless part of the distribution was return of capital which would lower your ACB. Although it doesn't appear to apply in your situation, DRIPs affect ACB since each DRIP is a new purchase. I avoid automatic DRIPs in all my unregistered accounts for this reason, more trouble than it's worth.

I am not an accountant and this should not be construed as tax advice. Just sharing info based on my own dealings with ACB.

[brunes]

Is it a Canadian or American company?
American, hence a lot of the complicatedness.



Your ACB is based on what you actually paid so after discount.

Hrm, that seems unfair :/ Because I am already being taxed on the discount on my paycheque as a taxable benefit. If I have to also take it into account on the capital gain, its starting to get to the point that the discount is pointless... being double-taxed on it would eliminate roughly 60% of the benefit, taking it down to around 2% instead of 5%... such a small amount I might as well drop out of this plan.


The transfer to TDW has no impact on these calcs. Dividends shouldn't affect ACB unless part of the distribution was return of capital which would lower your ACB. Although it doesn't appear to apply in your situation, DRIPs affect ACB since each DRIP is a new purchase. I avoid automatic DRIPs in all my unregistered accounts for this reason, more trouble than it's worth.

Glad I opeted out of the DRIP!

[FunSave22]

Your ACB is based on what you actually paid so after discount.
Unless there's been a tax law change since I left my old company a couple of years ago, this is incorrect.

The ACB = the price he paid for the stock + the amount of the taxable benefit

In other words, the ACB is the actual price of the stock on the day it was bought.




And just to be clear brunes, the exchange rate on the days you contributed money is irrelevant. The only relevant days for the exchange rate is on the days stock was bought (or the annual average as S5 already mentioned). Of course I'm assuming you only bought stock a couple of times a year, not every time money was deducted from your paycheck.

[FunSave22]

are you sure? thats very stupid setup
The difference between the price of the stock and the price you pay is most definitely a taxable benefit.

If the stock is selling at $10 a share and the employer is letting you buy it for $8 share, it's the exact same as if you bought it for $10 a share and the employer increased your pay by $2 for each share you bought.

So the difference between the price you paid and the actual price is a taxable benefit which is treated the same as income.

[S5]

Unless there's been a tax law change since I left my old company a couple of years ago, this is incorrect.

The ACB = the price he paid for the stock + the amount of the taxable benefit

In other words, the ACB is the actual price of the stock on the day it was bought.


Thanks for the correction, didn't interpret Brunes' income tax comment correctly. I'll edit my post above and direct readers to your reply.


Brunes, as to the dividends, since they are foreign they will be taxed as income. You've likely noticed the brokers withholding 15% on behalf of the IRS, you should be able to get a foreign tax credit for most or all of it on your Canadian income tax.

[brunes]

How do you file for that credit?

[S5]

How do you file for that credit?

Line 405 - Federal foreign tax credit
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/405-eng.html