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Reporting capital gains and losses requires good record keeping

Calculating capital gains and losses can be a painful process. But you are required to report all sales or dispositions of stocks, bonds and mutual funds in non-registered accounts in the year the transaction was completed on your Schedule 3. So, if you realized a gain or loss in 2012, make sure you have everything you need for your return.

You need to have records of:

  • the number of shares or units sold
  • the name of the fund or corporation, as well as the class of shares
  • year of acquisition
  • proceeds of the disposition
  • adjusted cost base
  • any expenses you incurred

The statements and T5008 slips you receive from your financial institution or broker will not contain all of this information, so you need to keep your own records. The most common piece of missing information is the year of acquisition or the adjusted cost base (ACB) of the initial investment. But both of these are vital to calculating your capital gain or loss correctly at tax time.

The ACB of an investment is the actual cost of the property plus any costs related to the purchase, such as commissions. If you have non-registered accounts, you should keep all trade confirmations and statements from investment accounts when purchases are made.

If you purchase the same stock or mutual fund more than once over a period of time, keep all of your records together. The documents will show the date of acquisition and the purchase price, commission paid and any other expenses related to the purchase, and all of the amounts will help calculate your ACB. The ACB will change each time new shares or units of the same company are purchased.

For mutual funds and stocks held in a dividend reinvestment plan (DRIP), the calculation of the ACB must be done even more frequently, because every time a distribution or dividend is used to buy more units or shares this is considered a purchase. The cost of every reinvestment must be added to the cost of the property already owned. Again, having all of your paperwork in one place makes these kinds of calculations much easier.

If you are purchasing stocks in foreign currency, make sure to record the exchange rate on the date of purchase and date of disposition, because your dispositions of foreign property are reported in Canadian dollars. And it is quite common for the exchange rate on the date of purchase to be different than on the date of sale. The fluctuating exchange rate will impact your capital loss or gain.

If you own shares in a company that splits, consolidates, merges with another company or spins-off a division, you need to have good records because your ACB calculation can become much more complicated.

All gains and losses are totalled for the year. For people facing a capital gain, 50 per cent is reported on your tax return and is taxable. If you are facing a capital loss, 50 per cent of the loss may be carried back and applied against any taxable capital gains reported on the returns for the three previous years, or you can carry them forward indefinitely.

Unfortunately, you cannot use the loss on the current year’s tax return, except if you are filing a final return for a deceased taxpayer. Any capital losses carried forward should be included on your Notice of Assessment, so you can use them in future years.

So if you sold stock, bonds or mutual funds this year and are trying to remember where you put all your statements, you may want to begin the process now, rather than waiting until April 29.


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