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T5008

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  • Aug 25th, 2021 8:52 am
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[OP]
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Jun 3, 2008
243 posts
256 upvotes
Newmarket

T5008

I own a mutual fund I purchased in Q1 2020 that has doubled (large capital gain). The fund issued a T4 for 2020 with a large capital gain (as they tend to take profits often).

The book value / cost for the fund within my account (at a bank) still shows the original purchase price as the cost. If I sell, the T5008 they issue will show a much larger capital gain than I owe due to the large capital gain already taxed on the T4.

I would report the correct capital gain on my return but I am concerned that the large gain shown on the T5008 will be a red flag for the CRA. I have all the transaction records and T4 to show the correct cost.

Should I be concerned?
7 replies
Deal Addict
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Feb 1, 2012
1971 posts
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Thunder Bay, ON
The capital gains on T3 box 21 is from trades the fund manager did internally to the fund. It is taxable in the year it is received and does not affect your ACB. That's an advantage of index funds: they tend not to incur much capital gains from trading activity.

T5008 is for transactions where you bought or sold securities, whether stocks or mutual funds or ETFs. You need to report capital gains from security sales for the tax year you sold them. Such gains are in addition to anything reported on T3 Box 21. If you are reporting less capital gains than indicated on a T5008 I think you have calculated your ACB wrong (except for trading costs which some T5008s ignore).

These are good resources:
CRA: Tax Treatment of Mutual Funds for Individuals

Adjusted Cost Base.ca
How to Calculate Adjusted Cost Base (ACB) and Capital Gains
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
[OP]
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Jun 3, 2008
243 posts
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Newmarket
Deepwater wrote: The capital gains on T3 box 21 is from trades the fund manager did internally to the fund. It is taxable in the year it is received and does not affect your ACB. That's an advantage of index funds: they tend not to incur much capital gains from trading activity.

T5008 is for transactions where you bought or sold securities, whether stocks or mutual funds or ETFs. You need to report capital gains from security sales for the tax year you sold them. Such gains are in addition to anything reported on T3 Box 21. If you are reporting less capital gains than indicated on a T5008 I think you have calculated your ACB wrong (except for trading costs which some T5008s ignore).

These are good resources:
CRA: Tax Treatment of Mutual Funds for Individuals

Adjusted Cost Base.ca
How to Calculate Adjusted Cost Base (ACB) and Capital Gains
Reinvested capital gains distributions increase the adjusted cost base of my holdings.
My concern is not the ACB calculation it is the incorrect cost basis being reported on the T5008 (according to the bank it is a system issue they cannot correct).
Sr. Member
May 2, 2019
723 posts
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Vancouver
braveheart2006 wrote: My concern is not the ACB calculation it is the incorrect cost basis being reported on the T5008 (according to the bank it is a system issue they cannot correct).
Not a unique or rare situation. CRA are well aware brokerages reported incorrect cost base (or none at all) for decades. It was always on "best effort" basis. There shouldn't be much extra chance for an audit.

Then again, you shouldn't be afraid of an audit (other than lost time) if you have your records and correct calculations.
[OP]
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Jun 3, 2008
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Newmarket
yvrbanker wrote: Not a unique or rare situation. CRA are well aware brokerages reported incorrect cost base (or none at all) for decades. It was always on "best effort" basis. There shouldn't be much extra chance for an audit.

Then again, you shouldn't be afraid of an audit (other than lost time) if you have your records and correct calculations.
Thanks yvrbanker. Appreciate your comments.
Deal Addict
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Feb 1, 2012
1971 posts
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Thunder Bay, ON
braveheart2006 wrote: Reinvested capital gains distributions increase the adjusted cost base of my holdings.
My concern is not the ACB calculation it is the incorrect cost basis being reported on the T5008 (according to the bank it is a system issue they cannot correct).
I don't know what I was thinking. :facepalm:

There are reasons that the cost on the T5008 may be wrong like securities transferred between accounts or transferred from another broker. And if an investor holds the same stock at multiple brokers there is no way that any one broker can know the cost base for tax purposes. My own experience is that T5008s from TD are right but that is on securities I have always held at TD. The cost field on TD T5008s was left blank until a few years ago. Good reasons to track it myself for verification purposes.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
Sr. Member
May 24, 2018
637 posts
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Ontario
If it is DRIP, then 100% of the distribution amounts should be added to the cost [not just the "capital gains" portion as per T3(21)]. Since you are getting more fund units in exchange, there's got to be dated transaction(s) on the statements. I am curious how the bank/brokerage would miss/mess it?

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