The adjusted cost base is the tax cost of a capital property, its original purchase price plus acquisition costs and certain adjustments, used to calculate a capital gain or loss on sale.
When you sell a capital property, shares, real estate, a business, your gain or loss is the proceeds minus the adjusted cost base. The ACB starts with what you paid, plus commissions, legal fees and improvements, and is adjusted over time for events like return of capital, reinvested distributions and partnership allocations.
Keeping an accurate ACB is essential and often overlooked, especially for investments held for years or bought in multiple lots. An understated ACB means you overpay tax on a capital gain; an overstated one invites reassessment. For identical properties bought at different prices, the ACB is the weighted average of all units held.
You buy 100 shares at $20 ($2,000) and later 100 more at $30 ($3,000). Your total ACB is $5,000 for 200 shares, an average of $25 each. Selling 100 shares uses a $25 ACB, not the price of any single lot.
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