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Hi everyone,

I understand that, with respect to capital gains, you have to pay taxes on the gains minus the costs associated with the trades involved. My question is, how and when are those costs subtracted? Are the costs already factored in to the year-end T-forms from the brokerage that we use? Or would we have to notify our accountant of the costs of the individual trades we made this year so the costs can be factored in at that point as part of our tax filing?

Thanks in advance for any clarification.
 

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When you buy a security, you add the trading cost to the actual cost in order to calculate the ACB of the stocks/units. So the trading cost becomes part of your original cost. Example: you paid $1500 plus $25 for the shares/units. So your original cost is $1525.

When you sell, you report the total proceeds from the sale, example $2000 for X number of shares (even though you only received $1975 because the cost was $25). Then on schedule 3 you report the selling costs and this gets deducted from your proceeds.

Proceeds $2000
less ACB $1525
less selling cost $25
Capital gain: $450
 

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When you sell, you report the total proceeds from the sale, example $2000 for X number of shares (even though you only received $1975 because the cost was $25). Then on schedule 3 you report the selling costs and this gets deducted from your proceeds.

Proceeds $2000
less ACB $1525
less selling cost $25
Capital gain: $450
I wonder why they do it as ACB when buying, but do not just have an 'Adjusted Selling Price = sell price - commission' at selling time? Is there any logic behind this difference?

Thanks.
 

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I wonder why they do it as ACB when buying, but do not just have an 'Adjusted Selling Price = sell price - commission' at selling time? Is there any logic behind this difference?

Thanks.
The commission is deducted from the selling price. Capital gains/losses are computed by accounting for both buying and selling commissions.
 

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The commission is deducted from the selling price. Capital gains/losses are computed by accounting for both buying and selling commissions.
Sorry, I get that; my Q was just asking why you as the tax payer do an ACB yourself factoring in the buying cost, but you report the total selling price and then the selling cost separately? Why is the tax form different for buying than selling?

Or am I way off here in my understanding of the posters comment that I first replied to?
 

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The form may be different but the spreadsheet schedule I have always provided simply has three $$ columns: proceeds, cost, profit. I'm sure CRA doesn't care. The forms are a product of the specific wording of the act. It's OK to cut to the chase.

"Are the costs already factored in to the year-end T-forms from the brokerage?" I hate to tell you but no one is going to give you any slip. This is your responsibility to keep track of and to prepare your own schedule. And if you try to offload that task onto a tax preparer at year-end be prepared to pay big bucks.

Most brokerages provide you with a list of transactions for the year, but this is NOT a substitute. Nor are they responsible for getting the $$ correct. There are a lot of reasons why using their $$ will be wrong.

So don't wait till you do your taxes. Prepare the schedule now, before you forget the intricacies. For the future it is much easier to simply update an ongoing spreadsheet at the time of sale.
 

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I wonder why they do it as ACB when buying, but do not just have an 'Adjusted Selling Price = sell price - commission' at selling time? Is there any logic behind this difference?

Thanks.
Well, one key difference is that when you're buying a stock, you may buy at different price points. So if you were to sell the lot, it makes it easier to do the calculation (either through averaging for cost, or just adding the total cost). When you sell, this generally isn't a concern.

As for the adjusted selling price, I did have a situation where a company was bought out, so I just received the proceeds with no disposal cost. Not that really makes a difference. Though, with the language on the tax form, I imagine when you enter proceeds from the disposal, you could just put in the net proceeds (with the transaction cost already accounted for), and just put 0$ for the expenses.
 
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