1. What Is Adjusted Cost Base (ACB)?

The Adjusted Cost Base (ACB) is a tax term used in Canada to determine the cost of an investment for tax purposes. It represents the average cost per unit of an investment, taking into account all purchase costs and adjustments over time.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• \( Total\ cost \) — Total amount paid for the investment
• \( Acquisition\ costs \) — Additional costs associated with purchasing (commissions, fees)
• \( Units \) — Number of units purchased

Explanation: The ACB calculation helps investors determine their true cost basis for tax reporting when selling investments.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for determining capital gains or losses when disposing of investments. It affects your tax liability and ensures compliance with Canadian tax laws.

4. Using the Calculator

Tips: Enter total cost in dollars, acquisition costs in dollars, and number of units. All values must be valid (costs ≥ 0, units > 0).

5. Frequently Asked Questions (FAQ)

Q1: What expenses are included in acquisition costs?
A: Acquisition costs include brokerage commissions, legal fees, transfer taxes, and other direct costs of purchasing the investment.

Q2: How does ACB affect capital gains?
A: Capital gain = Proceeds of disposition - ACB. A higher ACB results in lower capital gains and less tax payable.

Q3: Does ACB change over time?
A: Yes, ACB is adjusted for subsequent purchases, reinvested distributions, and return of capital distributions.

Q4: What is the difference between ACB and book value?
A: ACB is for tax purposes and includes all costs, while book value may use different accounting methods and exclude some costs.

Q5: How do I track ACB for multiple purchases?
A: Use the average cost method by summing all costs and dividing by total units owned, recalculating with each new purchase.