Adjusted cost base (ACB)

You meet ACB when an owner sells shares or other capital property and the gain has to be worked out. The Canada Revenue Agency’s capital gains guide says a capital gain arises when you sell a capital property for more than the total of its ACB and the outlays and expenses of selling it. How the gain is then taxed is a separate step.

How it is built

The starting point is cost, which the CRA says usually includes expenses to acquire the property, such as commissions and legal fees. Section 53 then adds and removes listed amounts. For shares, paragraph 53(1)(c) adds part of a contribution of capital made to the corporation otherwise than by way of a loan, subject to the conditions it sets. For identical shares, the CRA’s guide divides the total cost by the number of shares owned, and the per-share figure is recalculated if shares are split. It differs from paid-up capital, which belongs to a share class rather than to the holder.

What to ask

• Where the purchase records and any later capital contributions are kept
• Whether shares were acquired at different times or from a related person
• Whether any section 53 adjustment has been missed