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Mutual Funds - adjustment of cost basis? returned capital

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  • Apr 19th, 2007 10:26 pm
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Deal Fanatic
May 23, 2003
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Mutual Funds - adjustment of cost basis? returned capital

I was just doing my taxes today and I noticed on one of my mutual fund's t3 slip it had a box (42 I think) that said it was an adjustment to the cost basis. Something about a return of capital. How does one take this into account for future taxes? Am I suppose to deduct this amount from the "cost" I paid to purchase the mutual fund? So, when I go to sell it, it will show as a larger capital gain?

http://www.bmo.com/mutualfunds/ec/under ... gT3.html#9


Well, based on that link above, it seems right... but, what is the easiest way to track it all? I mean, if I am re-investing dividends I need to add those in also? I just started doing my own taxes last year. Equity trades are easy for me to account for... just not sure about mutual funds so much!
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Deal Addict
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Mar 25, 2002
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yes, the amount reported in box 42 is used to reduce the ACB for the units.
[OP]
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May 23, 2003
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So.. Does that mean if I wasn't keeping track of the adjusted cost basis I need to go back over old years and re-do it.... blah... makes things a lot more complicated!
Deal Addict
Sep 1, 2005
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Vancouver
your bank or whoever you purchase your stocks and funds through might keep accurate records of cost bases for your holdings, thats the easiest way, try asking them. if not just have spread sheet update it at the end of the year or whatever

opening ACB
+purchases
+reinvestments
-disposals (at cost)
-ROC
=ending ACB
[OP]
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May 23, 2003
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I tried calling them to ask them. They said it was cleared out of their system as the sale was back in October 2006 :( So... although there wasn't a big adjustment on my t3 slips, I need to go back and look at all of the dividend's that were re-invested to figure out my ACB! Going to take me forever... :(
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Jun 19, 2006
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YLSF wrote:
Apr 17th, 2007 12:46 pm
I tried calling them to ask them. They said it was cleared out of their system as the sale was back in October 2006 :( So... although there wasn't a big adjustment on my t3 slips, I need to go back and look at all of the dividend's that were re-invested to figure out my ACB! Going to take me forever... :(
If you think you have it bad.....think of all the seniors without computers and spreadsheets, who have owned income trusts for a few years, receive monthly distributions, and have to figure this out all for themselves.

Or worse even, their estates have to figure it all out and report accurate numbers.

I predict a continued boom for the accounting profession ;)
Deal Addict
Sep 2, 2004
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Wouldn't your total ACB just be the average price paid for each fund x the number of units you have? On my mutual fund statements it states the average cost of each unit. Seems pretty simple to me
Deal Addict
Jun 8, 2004
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Oakville
Capt. wrote:
Apr 18th, 2007 3:56 am
Wouldn't your total ACB just be the average price paid for each fund x the number of units you have? On my mutual fund statements it states the average cost of each unit. Seems pretty simple to me
No. Unlike equities, funds can distibute return on capital type of dividends. You pay taxes on this "deemed" income even though you received no additional units or cash. This "deemed" income gets factored into current fund prices, so your adjusted cost base needs to factor it in as well, otherwise you would pay taxes on this component twice.
Newbie
Jun 7, 2006
34 posts
cba123 wrote:
Apr 18th, 2007 3:57 pm
No. Unlike equities, funds can distibute return on capital type of dividends. You pay taxes on this "deemed" income even though you received no additional units or cash. This "deemed" income gets factored into current fund prices, so your adjusted cost base needs to factor it in as well, otherwise you would pay taxes on this component twice.
I think the OP is actually referring to situations where you receive a cash distribution that is not taxable as income, but instead reduces the ACB of your shares (and increases your capital gain when you sell them). They are a *huge* pain to track, especially when you are holding an investment for years and years.
Deal Addict
Sep 1, 2005
1637 posts
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Vancouver
Capt. wrote:
Apr 18th, 2007 3:56 am
Wouldn't your total ACB just be the average price paid for each fund x the number of units you have? On my mutual fund statements it states the average cost of each unit. Seems pretty simple to me
not all banks/brokers track this data, if OPs statements do show this figure yeah then use it.

In regards of tracking it use that spreadsheet i mentioned start at initial purchase, grab your T3s for how ever many years and +dividends/cap gains/other income reinvested and -ROC .. shouldnt take more than 10 minutes (although if you had a lot of purchase/disposal activity then maybe longer).. if you got divs/cgs/oi as cash then ignore those amounts

if its a big pain in the ass just use your cost.. how much money are we talking about her anyways right? .. 1000's 10000's, is it material?.. if not who cares
[OP]
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May 23, 2003
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Just to close this matter..

I ended up talking to another agent via the telephone banking side of the discount broker. This other lady was able to get me the info I wanted... and it took her only about 5 minutes talking to someone at her mutual fund desk. I guess it depends on how far they want to go for you sometimes to make the client happy!

All sorted out...
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