Personal Finance

Taxes for US Stocks

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  • Apr 1st, 2022 12:46 pm
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[OP]
Sr. Member
Mar 14, 2015
821 posts
88 upvotes
Edmonton

Taxes for US Stocks

I just became aware that I have to report the ACB of US dollars and I've been reporting the capital gains in CAD (after converting from USD).

Does anyone have any advice/recommendations how I can make this process easier?

I made over 50 trades in 2021 and my understanding is, each time I buy a security, it's a disposition and when I sell, then I'm buying more USD. So I would have to enter this line by line into Simple Tax to get the final ACB for my US dollars in 2021??
8 replies
Deal Fanatic
Jan 21, 2018
8413 posts
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Vancouver
All your shares of the same type get blended together indistinguishably into one pool, so every time you buy, the purchase price gets added to the total ACB of the shares, and every time you sell, you subtract the total ACB x (fraction of shares sold) to get the reduced total ACB. Shares bought 2 years ago are no different from shares bought 2 months ago in the blended pool. The current ACB applies equally to them all.

But the CRA requires proceeds of sale, acquisition cost, and capital gains to be reported in CAD, and you are required to use the exchange rate of the day of purchase and the exchange rate of the day of sale for every USD stock purchase and sale. Yes, this is a pain, and many people don't do this diligently and get away with it due to limited CRA auditing, but the rule is clear.
Deal Fanatic
Jul 12, 2008
5729 posts
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GTA
Scote64 wrote: All your shares of the same type get blended together indistinguishably into one pool, so every time you buy, the purchase price gets added to the total ACB of the shares, and every time you sell, you subtract the total ACB x (fraction of shares sold) to get the reduced total ACB. Shares bought 2 years ago are no different from shares bought 2 months ago in the blended pool. The current ACB applies equally to them all.

But the CRA requires proceeds of sale, acquisition cost, and capital gains to be reported in CAD, and you are required to use the exchange rate of the day of purchase and the exchange rate of the day of sale for every USD stock purchase and sale. Yes, this is a pain, and many people don't do this diligently and get away with it due to limited CRA auditing, but the rule is clear.
If there are a lot of transactions you can use the annual exchange rate for the year to make things easier, auditing takes time and costs a lot of money hence the focus on value for money audits.

After a year or 2, it just gets easier to use an RRSP or TFSA (if the stock pays no dividend) to make things easier at year end and maybe even avoid questions if the trades or losses are too much.
Member
Apr 13, 2019
228 posts
78 upvotes
I see where income tax is deducted from my USA dividends
Deal Fanatic
Jan 21, 2018
8413 posts
9260 upvotes
Vancouver
badmus wrote: If there are a lot of transactions you can use the annual exchange rate for the year to make things easier,
Technically no you can't.

People get away with using the annual rate because it's easier, it's close enough if you trade throughout the year, and the CRA doesn't care enough to enforce it. But the regulation is clear: you are supposed to use specific day exchange rate for stock sales and purchases. See https://www.taxtips.ca/filing/reporting ... ctions.htm
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Apr 2, 2010
3405 posts
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GTA
Further to my post above, this would be a great time to brush up on your Excel skills and start trying Vlookup.
You should be able to mostly automate the FX lookup between CAD/USD this way making this an easy thing to handle.
Deal Fanatic
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Sep 2, 2006
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Scote64 wrote: Technically no you can't.

People get away with using the annual rate because it's easier, it's close enough if you trade throughout the year, and the CRA doesn't care enough to enforce it. But the regulation is clear: you are supposed to use specific day exchange rate for stock sales and purchases. See https://www.taxtips.ca/filing/reporting ... ctions.htm
i filed my taxes using 1.25 but i didn't sell very much. I bought a bunch and held and re-invested. My net capital gains were quite low as a result. Though this year I plan on selling some larger holdings though.
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Deal Fanatic
Jul 12, 2008
5729 posts
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GTA
Scote64 wrote: Technically no you can't.

People get away with using the annual rate because it's easier, it's close enough if you trade throughout the year, and the CRA doesn't care enough to enforce it. But the regulation is clear: you are supposed to use specific day exchange rate for stock sales and purchases. See https://www.taxtips.ca/filing/reporting ... ctions.htm
You are correct, from the same link
“Dividends, interest and other income can use average annual rate or transaction date rate - be consistent from year to year!”

From CRA

Report your net gain or loss in Canadian dollars. Use the exchange rate that was in effect on the day of the transaction. If there were transactions at various times throughout the year, you can use the annual average exchange rate

https://www.canada.ca/en/revenue-agency ... ncies.html

The other cause of foreign currency tribulations is properly calculating the gain or loss on the sale of foreign stocks, bonds, or even real estate. For these transactions, you are supposed to use the actual foreign exchange rate that was in effect on the day of the transaction.

https://financialpost.com/personal-fina ... d421e/amp/

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