Understanding Adjusted Cost Base (ACB) for Canadian Stocks

Adjusted Cost Base (ACB) is the total cost of acquiring an investment, including the purchase price plus any associated costs like commissions. In Canada, ACB is used to calculate capital gains or losses when you sell securities in a non-registered account. Getting ACB wrong can lead to incorrect tax filings.

How ACB Is Calculated

For Canadian tax purposes, the ACB of identical securities is calculated using the average cost method. When you buy shares, the total cost (price plus commission) is added to your existing ACB. When you sell shares, the ACB per share is the total ACB divided by the number of shares held at the time of sale.

Example Calculation

Buy 100 shares at $10 ($1,000 + $10 commission = $1,010 ACB). Buy 50 more shares at $12 ($600 + $10 commission = $610). Total ACB is now $1,620 for 150 shares. ACB per share is $1,620 / 150 = $10.80. If you sell 50 shares at $15, your capital gain is (50 x $15) - (50 x $10.80) = $750 - $540 = $210.

Events That Affect ACB

• Purchases (including DRIP reinvestments) increase total ACB.
• Return of capital distributions reduce ACB without triggering immediate tax.
• Stock splits adjust the per-share ACB but not the total ACB.
• Superficial losses (wash sales) add the denied loss to ACB.
• Foreign currency conversions must use the exchange rate on the transaction date.

Why Tracking ACB Matters

Your brokerage may not track ACB correctly in all situations — particularly if you transfer shares between brokerages, receive return of capital distributions, or hold US-listed securities in a non-registered account. A portfolio tracker that computes ACB from your full transaction history can help you catch discrepancies.

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