Tax season is fast approaching. Do you have your ducks in a row? To be more specific, do you have records of stock investments – or re-investments that you made years ago? Many Canadian investors have the same problem: they’ve lost trading records and now can’t figure out their adjusted cost base (ACB), which makes it very hard to accurately calculate capital gains for tax purposes. However, it is not a good idea to “guesstiimate” it because the Canadian Revenue Agency requires you to justify it, and, if you can’t, they may reassess your return and could charge you interest or penalties.
You are required to maintain records to establish your tax liability. If you no longer have them, a good starting point is to get information from the financial institutions with whom you invested. For example, discount brokers make transaction records available for free on their websites. But, beware. Their records may only go back a few years. For older records, you may end up paying a research fee ranging from $40 to $200, one discount broker stated. If you have the original stock purchase records, but can’t document later dividend re-investments, Weinstein advises, you can establish the ACB as equal to the value of your original purchase. Weinstein recommends that this approach is better than claiming an ACB of zero. Another option is to gather the data you have and create a spreadsheet to figure out the how the money was reinvested when your shares were in a specific plan. The best option is to keep transaction records so you won’t be stressed out next tax season, Heinzl advises.
“As tempting as it might be to “fudge the numbers” and come up with a guesstimate of the ACB, this is not recommended.“