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I really think the Canadian ETF industry has to change what they're doing about these reinvested distributions, capital gains, and ROCs.

This has to be made simpler IMHO. Those of us on this board are very familiar with ETFs, and yet here we still are, tracking down CDS innovations spreadsheets, or the Tax Characteristics documents, and trying to decipher what's on the T3 statements.

All these years later, still trying to make sense of properly accounting for the reinvested distributions and ROC. There are too many wacky types of distributions.

I just think this is unnecessary complexity and should be improved by the industry.
Yes, I wonder what percent of ETF investors are accurately tracking ACB in nonreg accounts. Probably very low. And it`s complicated because neither the ETF company or the broker can be sure of the client`s ACB if they hold the same security in multiple accounts. It`s only the last few years that the cost box has been filled in for T5008s.

Maybe the capital gains could just be paid in cash rather than reinvested. That may be a concern though, for an index ETF if the index is revised, or the ETF faces a lot of redemptions that create capital gains. As an investor I would prefer reinvestment of such unpredictable cashflows (as opposed to interest and dividend distributions that are relatively consistent and some investors depend on them).

Another solution would be better broker reporting. T3s already have box 42 for RoC cost base adjustments. Maybe CRA could require a new box for cost base adjustments due to reinvested distributions. Another option would be for brokers to issue an annual cost base report, listing all transactions (buy, sell, RoC, reinvested distributions). I already get a transaction summary from TDDI, it would be easy to add RoC and reinvested distributions to that.

I already get everything I need from TDDI on my statements and Summary of Trust Income. It did take me a while to realize that though because it can be so cryptic. Even some info from the brokers on what these transactions are and how to use them for tax reporting would be a big help.
 

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... I don't think that invalidates my statement that "ETF capital gains are listed in box 21 of the T3, whether they are paid in cash or reinvested." :unsure:
Taxtips.ca says:
"Reinvested capital gains distributions will be included as capital gains on your T3, but a portion of the capital gains reported on the T3 may have been part of a cash payment ... Another thing that can be done is to compare the total of distributions that you were actually paid to the total of distributions shown on your T3 ... These reinvested capital gains distributions are included in the amount of capital gains in box 21 on the T3 slip. They are not normally included in any other of the T3 boxes. "

So maybe there's some situation where other boxes have ACB changing effect but so far, I haven't run into it.


There was also some comment about distributions having to be received in the calendar year, which taxtips.ca disagrees with.

"Keep in mind that a distribution that you received in January of 2020 may be included in the T3 income for 2019, because it was recorded by the ETF in December."

Cheers
 
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