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Tax Question - Non Registered eSeries Funds

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  • Apr 21st, 2014 3:52 am
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Newbie
May 9, 2013
66 posts
120 upvotes
Toronto

Tax Question - Non Registered eSeries Funds

How to report the following scenario in Tax Return: All funds bought and sold in 2013

Fund 1 (Canadian Bond Index e) bought for 10K
Fund Sold 9.6K (this includes the Dividend due to DRIP)
Dividend Received 100

Fund 2 (International Index e) bought 10K
Fund sold: 10.8K (this includes the Dividend due to DRIP)
Dividend Received: 100

For the dividend I have received T3 (shows up in Box 25, 26, 34). I can enter the T3 in StudioTax, no problem.

I am a bit confused on how to calculate Capital gain/loss:
Total Amount Bought: 20K
Total got back when sold: 9.6K + 10.8K = 20.4K (this includes the Dividend due to DRIP)
Out of the 400 gain, 200 were Dividends which got reported in T3.

Hence my total capital gain = CAD 200?
22 replies
Deal Addict
Oct 21, 2012
1436 posts
498 upvotes
Toronto
google adjusted cost base or let a professional do it for you.
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
As Joey1234 mentioned you actually have to do a detailed calculation of your Adjusted Cost Base for a unit of each fund before you can calculate your capital gain or loss.

Your starting cost base for the first fund is ($10 000 / number of units you received for that money) = X $ per unit
Next, you received a dividend. Say the dividend was $100. The $100 purchased you another B number of units. Your new ACB is ($10 000 + $100)/(initial number of units purchased + B) = Y $ per unit.
You have to repeat that up until after the last time you added units to your holdings. That will tell you your final ACB.

You can find some examples and information in the CRA brochure on how to handle mutual funds at
http://www.cra-arc.gc.ca/E/pub/tg/rc4169/rc4169-12e.pdf
You should have the information about how many units you received and at what price in your transaction history.

It's difficult and slow work to do this. In fact, the Canadian Couch Potato said in http://canadiancouchpotato.com/2013/04/ ... -accounts/ that it's why he wouldn't like to hold mutual funds with a DRIP in a non-registered account. At least you only held the funds for one year.
Deal Addict
User avatar
Dec 26, 2010
1736 posts
776 upvotes
Calgary
Like mentioned, you have to do the ACB to get your capital gains.

The bond fund "distributions", not dividends, are taxed as income. I'm pretty sure it's the same thing with the international fund (are you sure it's an international "bond" fund. There are no e-Series like that. There's international equities? The dividend tax credit only applies to eligible Canadian companies. This is why people tend to hold international and fixed income in tax sheltered accounts, and leave Canadian equities in the taxable account.
Indexer, non-yield chasing, low cost, broad based, as simple as possible investor.
Deal Guru
User avatar
May 6, 2005
11907 posts
1734 upvotes
GVR
Doesn't TD keep track of the ACB for eFunds? I'd think easy enough for them to provide?
Newbie
May 9, 2013
66 posts
120 upvotes
Toronto
Thanks for the detailed response. Yes, I am new to investing, so when I heard couch potato and eSeries, I jumped into to. Its been a good learning experience. I will checkout the links you have shared.

BetCrooks wrote: As Joey1234 mentioned you actually have to do a detailed calculation of your Adjusted Cost Base for a unit of each fund before you can calculate your capital gain or loss.

Your starting cost base for the first fund is ($10 000 / number of units you received for that money) = X $ per unit
Next, you received a dividend. Say the dividend was $100. The $100 purchased you another B number of units. Your new ACB is ($10 000 + $100)/(initial number of units purchased + B) = Y $ per unit.
You have to repeat that up until after the last time you added units to your holdings. That will tell you your final ACB.

You can find some examples and information in the CRA brochure on how to handle mutual funds at
http://www.cra-arc.gc.ca/E/pub/tg/rc4169/rc4169-12e.pdf
You should have the information about how many units you received and at what price in your transaction history.

It's difficult and slow work to do this. In fact, the Canadian Couch Potato said in http://canadiancouchpotato.com/2013/04/ ... -accounts/ that it's why he wouldn't like to hold mutual funds with a DRIP in a non-registered account. At least you only held the funds for one year.
Newbie
May 9, 2013
66 posts
120 upvotes
Toronto
Yup, my mistake, its International Index - e (tdb911) I have corrected it now. Thanks for the advice!

wm009 wrote: Like mentioned, you have to do the ACB to get your capital gains.

The bond fund "distributions", not dividends, are taxed as income. I'm pretty sure it's the same thing with the international fund (are you sure it's an international "bond" fund. There are no e-Series like that. There's international equities? The dividend tax credit only applies to eligible Canadian companies. This is why people tend to hold international and fixed income in tax sheltered accounts, and leave Canadian equities in the taxable account.
Sr. Member
Jun 9, 2006
965 posts
425 upvotes
I called TD and they provided me with the book value of the fund I sold. Book value is increased whenever I get dividends reinvested.

ie: Sold 5000$ of Euro e-series this week.
Market Value = 5000$
Book Value = 3605.62$ (told by TD representative)

Capital Gain = 1394.38$

Is there something wrong with this logic?
Deal Addict
Oct 21, 2012
1436 posts
498 upvotes
Toronto
intelmic wrote: I called TD and they provided me with the book value of the fund I sold. Book value is increased whenever I get dividends reinvested.

ie: Sold 5000$ of Euro e-series this week.
Market Value = 5000$
Book Value = 3605.62$ (told by TD representative)

Capital Gain = 1394.38$

Is there something wrong with this logic?
Ya it is wrong. Even though the fund distributes dividends it may include ROC and or CG.
Deal Guru
User avatar
May 6, 2005
11907 posts
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GVR
joey1234 wrote: No!
Cannot wait to sell my eFunds in 20+ years after many years of monthly contributions and reinvested dividends :)
Deal Addict
Oct 21, 2012
1436 posts
498 upvotes
Toronto
Kaitlyn wrote: Cannot wait to sell my eFunds in 20+ years after many years of monthly contributions and reinvested dividends :)

Yes if you don't track it then it will be quite a lot of work to go back and do it.
Deal Guru
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May 6, 2005
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GVR
joey1234 wrote: Yes if you don't track it then it will be quite a lot of work to go back and do it.
But by then I expect to be able to extract account history and then I'll have all contributions and reinvested amounts in excel done for me... right!? :)
Deal Addict
Oct 21, 2012
1436 posts
498 upvotes
Toronto
Kaitlyn wrote: But by then I expect to be able to extract account history and then I'll have all contributions and reinvested amounts in excel done for me... right!? :)
As I have already said, dividend payouts through funds can include ROC and CG and these are not calculated properly by the brokerages or tracked. Your ACB may be higher or lower depending on the type of fund. ROC lowers your ACB while reinvested CG raises it.

Over a long period of time the difference between what the brokerage says your avg. cost is and the true ACB can be large. CRA can and will audit you.
Deal Guru
User avatar
May 6, 2005
11907 posts
1734 upvotes
GVR
joey1234 wrote: As I have already said, dividend payouts through funds can include ROC and CG and these are not calculated properly by the brokerages or tracked. Your ACB may be higher or lower depending on the type of fund. ROC lowers your ACB while reinvested CG raises it.

Over a long period of time the difference between what the brokerage says your avg. cost is and the true ACB can be large. CRA can and will audit you.
Genuine question - how can this make any sense? I like to consider myself much more informed on investing than your average investor, but whether eFunds or really ANY mutual fund option, with the amount of people investing... there are WAY too many people who wouldn't know their ACB - let alone what ACB actually stands for... :)

To be this seems beyond daunting to track/recover the actual ACB through 5+ years of monthly eFunds investing + dividend reinvesting...
Deal Addict
Oct 21, 2012
1436 posts
498 upvotes
Toronto
Kaitlyn wrote: Genuine question - how can this make any sense? I like to consider myself much more informed on investing than your average investor, but whether eFunds or really ANY mutual fund option, with the amount of people investing... there are WAY too many people who wouldn't know their ACB - let alone what ACB actually stands for... :)

To be this seems beyond daunting to track/recover the actual ACB through 5+ years of monthly eFunds investing + dividend reinvesting...
ignorance is not an excuse to the CRA :)

Read the link I posted, it is informative.

Keep in mind, this only applies outside of a registered product.
Member
Jan 18, 2014
209 posts
14 upvotes
joey1234 wrote: ignorance is not an excuse to the CRA :)

Read the link I posted, it is informative.

Keep in mind, this only applies outside of a registered product.
This sounds a lot of work...
If buy only and no sell, we still have to keep track of these things?
I would pay a professional to do my tax then but to keep all the papers to give him at the first place is already a lot of work.
Member
Dec 11, 2008
355 posts
81 upvotes
Ottawa
joey1234 wrote: As I have already said, dividend payouts through funds can include ROC and CG and these are not calculated properly by the brokerages or tracked. Your ACB may be higher or lower depending on the type of fund. ROC lowers your ACB while reinvested CG raises it.

Over a long period of time the difference between what the brokerage says your avg. cost is and the true ACB can be large. CRA can and will audit you.
I'm still pretty new to figuring out all this tax stuff, but I think now I understand most things, except for the ROC. Everything else I can keep track of, but the ROC is rather mysterious. The link you provided talks about calculating ACB for ETFs, but not TD e-series, so how do you find the ROC for these funds (because they don't seem to be posted anywhere online)? Would this figure be included in the tax slips?

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