How Adjusted Cost Base (ACB) Works in Canada

A practical guide for Canadian investors to calculating Adjusted Cost Base using the CRA weighted average cost method, with a worked example and an explanation of the superficial loss rule.

What is Adjusted Cost Base?

Adjusted Cost Base (ACB) is the total cost of an investment for tax purposes. It includes the purchase price plus any commissions and other reasonable costs of acquiring the property. When you sell a security, the Canada Revenue Agency (CRA) uses your ACB to determine your capital gain or loss: the gain or loss equals your proceeds of disposition minus the ACB and any outlays and expenses on the sale.

The CRA weighted average cost method

When you own more than one identical share of the same security, the CRA requires you to use the weighted average cost method rather than tracking each lot separately. Your ACB per share is the total ACB of all shares held divided by the total number of shares. Every purchase recalculates this average; a sale reduces the total ACB proportionally but does not change the ACB per share.

Worked example

  1. Buy 100 shares at $10.00 plus a $5 commission. Total ACB = $1,005, so ACB per share = $10.05.
  2. Buy another 100 shares at $12.00 plus a $5 commission ($1,205). Total ACB = $2,210 across 200 shares, so ACB per share = $11.05.
  3. Sell 50 shares at $15.00 with a $5 commission. Proceeds = $745. The ACB of those 50 shares = 50 × $11.05 = $552.50, so the capital gain = $745 − $552.50 = $192.50.
  4. You still hold 150 shares with a total ACB of $1,657.50, and the ACB per share remains $11.05.

Capital gains and losses

In Canada, a portion of your net capital gain is included in taxable income (the inclusion rate). Capital losses can generally be applied against capital gains. Inclusion rates and rules change over time, so confirm the current rate with the CRA for the tax year you are filing.

The superficial loss rule

A superficial loss occurs when you sell a security at a loss and, within 30 days before or after the sale (a 61-day window including the day of sale), you or an affiliated person buys the same or an identical security and still holds it at the end of that period. When this happens, the CRA denies the loss. Instead, the denied loss is added to the ACB of the repurchased shares, deferring the benefit until you eventually dispose of them.

For example, if you sell 100 shares at a $500 loss on June 1 and buy 100 identical shares on June 20, the $500 loss is denied and added to the ACB of the newly purchased shares.

Official CRA references

This guide is for general information only and is not tax advice. Verify your figures against your own records and consult a qualified tax professional for your situation.

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