Calculating the average cost of property
The average cost is calculated by dividing the total cost of identical properties purchased (this is usually the cost of the property plus any expenses involved in acquiring it) by the total number of identical properties owned.
Any amount reported in box 42, Amount resulting in cost base adjustment, of the T3 slip represents a change in the capital balance of the mutual fund trust identified on the slip. This amount is used when calculating the adjusted cost base (ACB) reported on Schedule 3, Capital Gains or Losses, for the property in the year of disposition. For more information, see Tax treatment of mutual funds.
You also use this method to calculate the average cost of identical bonds or debentures you bought after 1971. However, the average cost is based on the principal amount for each identical property, that is, the amount before any interest or premiums are added.
Example 1
Over the years, you have bought and sold common shares of STU Ltd. This example shows how, after each purchase, the ACB of your shares changes.
In 2001, you purchased 100 shares for $1,500. The ACB is therefore $15.00 ($1,500 ÷ 100).
In 2006, you purchased an additional 150 shares for $3,000. The new ACB is calculated by dividing the total cost of the shares of STU Ltd. ($1,500 + $3,000 = $4,500) by the total number of shares you have purchased (100 + 150 = 250). Therefore, the ACB is $18.00 ($4,500 ÷ 250).
In 2008, you sold 200 shares for $3,600. The ACB remains at $18.00 per share.
In 2024, you purchased 350 shares for $7,350. The new ACB is $20.63 [($900 + $7,350) ÷ (50 + 350)].
Example 2
In 2001, you bought units of a mutual fund trust. When you bought them, you chose to reinvest your annual income distributions in more units. This example shows how the ACB of your units changes after each purchase.
In 2001, you purchased 833.3333 units for $15,000. The ACB is therefore $18.00 ($15,000 ÷ 833.3333).
In 2001, you reinvested distributions of $1,170 by purchasing 59.8466 units at $19.55 per unit. The new ACB is calculated by dividing the total cost of the units ($15,000 + $1,170 = $16,170) by the total number of units you have purchased (833.3333 + 59.8466 = 893.1799). Therefore, the ACB is $18.10 ($16,170 ÷ 893.1799).
In 2002, you reinvested distributions of $1,455.30 by purchasing 70.5429 units at $20.63 per unit. The new ACB is $18.29 [($16,170 + $1,455.30) ÷ (893.1799 + $70.5429 = 963.7228)].
In 2008, you earned $7,316 by selling 400 units at $18.29 per unit. The ACB remains at $18.29 per share.
In 2024, you reinvested distributions of $721.65 by purchasing 36.2821 units at $19.89 per unit. The new ACB is $18.38 [($10,309.30 + $721.65 = $11,030.95) ÷ (563.7228 + 36.2821 = 600.0049)].
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