How do I pay tax on Return of Capital (ROC)?
I hoping some one out there can help me out. I’ve read articles, I’ve read the Tax Treatment of Mutual Funds for Investors manual and I am ready to shoot myself. Basically this return of capital and adjust cost base calculation is confusion the ‘heck’ out of me.
ROC is not taxed, but it is described as deferred capital gains (or lost). So in addition to ‘when’ is the tax is paid, it is also how is the tax calculated ?
Perhaps an example would help.
I had a mutual fund. Kept it for 3 years then decided to sell it. This fund paid monthly distributions, all of it reinvested. At the end of each year I get my T3 with a box 42, my ROC amount.
After only 3 years I have not received all of my capital back so my ACB is not zero. Well it shouldn’t be zero.
This is where I need help. In my simplified understanding of Tax Treatment of Mutual Funds and ROC, is the following correct?
ACB = (book value – (ROC of year 1 + ROC of year 2 + ROC of year3) )
Capital gains or lost = sale price of all units – (purchase price of all units ie. book value - (ROC of year 1 + ROC of year 2 + ROC of year3) )
If you sell all of your units, do you still need to calculate and maintain the ACB?
Thank you
ROC is not taxed, but it is described as deferred capital gains (or lost). So in addition to ‘when’ is the tax is paid, it is also how is the tax calculated ?
Perhaps an example would help.
I had a mutual fund. Kept it for 3 years then decided to sell it. This fund paid monthly distributions, all of it reinvested. At the end of each year I get my T3 with a box 42, my ROC amount.
After only 3 years I have not received all of my capital back so my ACB is not zero. Well it shouldn’t be zero.
This is where I need help. In my simplified understanding of Tax Treatment of Mutual Funds and ROC, is the following correct?
ACB = (book value – (ROC of year 1 + ROC of year 2 + ROC of year3) )
Capital gains or lost = sale price of all units – (purchase price of all units ie. book value - (ROC of year 1 + ROC of year 2 + ROC of year3) )
If you sell all of your units, do you still need to calculate and maintain the ACB?
Thank you