Return to the Household Finances Forum | Post a Follow-Up

 o
Question re Calculating Adjusted Cost Base in Canada

Posted by ivamae (My Page) on
Sun, Feb 22, 09 at 10:40

I have a few dividend stocks and am new to this.

I have arranged for the dividends to be re-invested.

This brokerage only re-invests full shares - rest of the dividend is added to cash.

When calculating the adjusted cost base, do I add in the whole dividend or just the portion that buys complete extra shares.

The remainder is added into my cash account with the broker.

Thanks

ivamae


Follow-Up Postings:

 o
RE: Question re Calculating Adjusted Cost Base in Canada

Someone will jump all over me if I'm wrong - and rightfully so. I don't think it's any different in Canada than in the US. Your cost basis is the price per full share as your brokerage only reinvests full shares. If the dividend amount doesn't buy full shares, the overage/shortage goes to money market or cash and does not figure into the stock purchase or the cost basis for any shares purchased.

I have one stock where the dividends are routinely reinvested - and I get partial shares, no matter how small the portion of the share. Therefore, it is incumbent on saving your brokerage statements which will indicate your cost basis for each share purchased - the money market or cash portion of your account will capture the part of the dividend reinvestment that was insufficient to buy full shares.

In a word, you don't have to do any recalculating of the cost basis. If part of your dividend is not actually applied to buying stock, it doesn't factor into any cost basis for that stock.


 o
RE: Question re Calculating Adjusted Cost Base in Canada

I thought this was what made sense but wanted to be sure.

I don't want to pay double tax.

Thamks for your help.

ivamae


 o
RE: Question re Calculating Adjusted Cost Base in Canada

Hi Iva Mae,

Let`s say that your dividend is $15.00.

Current share price is $10.00.

Your income to be reported this year is $15.00 (unless in an RRSP). If on a Canadian company, (held outside of an RRSP) each dollar grossed up to $1.45 for tax reporting (as your broker`s report will indicate ... and 18. (something) percent of that figure will be deducted from the tax that you owe, according to the dividend tax credit, again, it will be reported on the tax report from your broker.

Let`s say that you owned 10 shares at $5.00 per share before, total $50.00.

Now, you own 11 shares at $50.00 former price plus $10.00 current price is $60.00 ... which amount you need to keep track of in order to calculate adjusted cost base when you sell.

The $5.00 extra was added to current cash ... and used to buy pancakes at the Shrove Tuesday supper.

ole joyful


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Household Finances Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here