Adjusted cost base (ACB) is the number that determines how much of your capital gain or loss you report to CRA when you sell an investment. Getting it right matters. Getting it wrong — even accidentally — can result in overpaying tax, underpaying and triggering a reassessment, or spending hours reconstructing records you should have been tracking all along.
The definition
Adjusted cost base is the average cost of your investment, calculated per unit, across all taxable accounts you hold for that security. It includes:
- the original purchase price;
- commissions paid on purchases;
- any adjustments that change your cost over time (such as return of capital distributions or reinvested capital gains from ETFs);
- the original cost carried forward when you transfer positions between brokerages.
When you sell, your capital gain equals:
Proceeds of disposition − Adjusted cost base − Selling commissions = Capital gain or loss
Why “per unit across all taxable accounts” matters
The phrase “across all taxable accounts” is where most investors run into trouble. Canadian tax law treats identical securities held by the same taxpayer as a single pool, regardless of which brokerage holds them.
If you hold 100 shares of XYZ ETF at Questrade and 50 shares at Wealthsimple, you do not have two separate ACBs — you have one weighted-average ACB pool covering 150 shares. When you sell 50 shares from Wealthsimple, the ACB you deduct is based on the whole pool, not just the Wealthsimple portion.
Your broker cannot calculate this for you. Each broker only sees its own side.
What “adjusted” means in practice
The word “adjusted” is doing real work here. Your ACB is not simply what you originally paid. It must be adjusted over the life of the investment for:
Return of capital (ROC): ROC distributions from ETFs or mutual funds reduce your ACB in the year they are paid, even if you never see the cash. This means a future sale produces more taxable gain than it would if you had never held the ETF — and if you ignored the ROC adjustments, you will underreport that gain.
DRIP shares: When dividends are reinvested in new shares through a dividend reinvestment plan (DRIP), those shares have a cost that adds to your ACB. Missing DRIP cost additions means your ACB is understated and your reported gain is too high.
Stock splits: Splits change the share count without changing total ACB. Post-split ACB per share is recalculated.
Transfer cost carry-forward: When you transfer a position between brokerages, the receiving broker may not know your original cost. For ACB purposes, the original cost must carry through — you cannot treat the transfer as a fresh start.
Why your broker’s book value is not your ACB
Brokers show “book value” or “average cost” in their interfaces. This is not your adjusted cost base. The differences:
- Book value is account-local. It only reflects purchases and sales within that one account.
- Book value may not include ETF distribution adjustments (ROC, reinvested gains).
- Book value cannot pool across accounts even if you ask.
- The T5008 tax slip your broker sends may have a cost figure, but brokers explicitly disclaim that it may not equal your legal ACB.
Who needs to track ACB
If you hold investments in a non-registered (taxable) account and have ever sold, transferred, or received distribution adjustments, you need to track ACB. Registered accounts (RRSP, TFSA, FHSA, RESP) do not require ACB tracking because gains inside those accounts are sheltered.
ACB tracking becomes more complex — and the stakes of getting it wrong become higher — when you:
- hold the same ETF or stock at more than one brokerage;
- trade USD-denominated securities (requiring Bank of Canada FX conversion at each transaction date);
- receive return of capital or reinvested distribution adjustments annually from Canadian ETFs;
- transfer positions between brokerages;
- participate in DRIP.
How CRA expects you to document it
CRA does not have a prescribed format for ACB records, but the expectation is that you can support any capital gain or loss you report. That means you should be able to show:
- the date and cost of every purchase;
- every adjustment applied and why;
- the FX rate used for foreign-currency transactions;
- the carry-forward cost from any transfers.
If you are audited or reassessed, these records are what you would need to provide.
Common ACB mistakes that cost Canadian investors money
Mistake 1: Using the broker’s book value as ACB. The T5008 Box 20 figure your broker provides is their internal book value — not your legal adjusted cost base. It will be wrong whenever you have held the same security at another brokerage, transferred shares between accounts, or received ETF distributions that reduce or increase cost.
Mistake 2: Not pooling across accounts. If you hold the same ETF at two brokerages, you have one pooled ACB across both — not two separate ACBs. Many investors calculate and track ACB per brokerage account, which produces incorrect capital gains on sale.
Mistake 3: Ignoring return of capital. ETFs that pay return-of-capital distributions are quietly reducing your ACB every year the distribution occurs. Miss five years of ROC adjustments and your ACB may be overstated by hundreds or thousands of dollars — which means your reported capital gain at sale will be larger than it needs to be.
Mistake 4: Not tracking DRIP. Every dividend reinvestment adds new shares at cost to your ACB pool. Over years of monthly DRIP purchases, the cumulative cost addition can be substantial. Investors who omit DRIP from their ACB records overstate their taxable gain on disposition.
How long must you keep ACB records?
CRA’s general rule is that records supporting items on a tax return must be kept for six years after the filing year. For ACB records, the relevant period extends through the life of the investment. If you bought shares ten years ago and still hold them, you may need that original purchase record to defend the ACB you apply when you eventually sell.
For positions held across decades, this means the ACB tracking obligation extends as long as the position exists — and for six years after full disposition. Practical advice: maintain a running ACB ledger from the date of first purchase. Do not rely on being able to reconstruct it from brokerage statements later. Brokers do not guarantee perpetual access to historical transaction records, and some cost data becomes unavailable after account closures or platform migrations.
When to seek professional advice on ACB
Complex situations — superficial loss rule adjustments, corporate reorganizations, share consolidations, US-listed securities with significant FX exposure, and positions held across many years and brokerages — are worth reviewing with a tax advisor. The mechanics of ACB calculation are well-defined in the Income Tax Act, but applying them correctly to unusual situations requires judgment. This site provides informational guidance; it is not a substitute for professional tax advice on specific situations.
MyCostBase keeps this ledger for you — start free with manual entry →