During the tax year, you may sell securities you previously purchased or, in the case of short selling, you may close your position. The sale of securities in these situations may be taxable as a capital gain or loss.
Capital gains/losses and adjusted cost base (ACB)
A capital gain or loss is the difference between the money you initially invested and the amount you received from the sale. This is calculated based on the adjusted cost base (ACB) for the security, and the final sale price. The ACB
is the cost of purchasing a security, adjusted for expenses and other activity in your account related to that security.
If the money you receive from the sale of the security is greater than the ACB, then you have made a capital gain, and 50% of that amount is taxable.
If the money you receive from the sale of the security is less than the ACB, then you have a capital loss. A capital loss can be used to offset capital gains you have in the same year, any of the preceding three years, or in future years.
Tax documents reporting sale of securities
At tax time, you will receive the following related to the sale of securities:
- Trading Summary, which reports all security trading (buys and sells) in your account during the year. Note: starting this year, the Trading Summary is being issued to you separately from the T5
- Statement of Securities Transactions (T5008) which reports the amount paid or credited to you for securities you sold during the tax year. On this tax slip:
- The amount in Box 21 is the money you received for selling a security
- The amount in Box 20 is the cost or book value (cost base) of the security that was sold. The cost base is the original value of an asset.
These documents do not state your capital gains or losses. You use these documents, along with your own records you keep to track your buys and sells, to help you determine the capital gains or losses for securities you have sold during the year.
Important note: The amount in Box 20 may or may not represent the actual ACB. In some cases the amount may appear as "0", either because the cost base is actually zero or we do not have an accurate cost base. To make sure you are accurately
reporting your capital gains and losses in your tax return, it is your responsibility to keep track of the ACB for each of your securities and consult with a tax or accounting advisor as needed.
For an example of how the ACB is calculated, go to Average price and adjusted cost base.