Adjusted Cost Base Mistakes That Cost Canadians Thousands

Video Description

ACB Calculation Gone Wrong? Here's What the CRA Will Do Paid links: Wealthsimple (referral) + Amazon (affiliate) — my opinions. 👉 Wealthsimple — https://wealthsimple.com/invite/HTN0SP — File Schedule 3 free, T5008 auto-imports + $25 bonus 📖 Books that shaped this video (paid links): 📖 Beat the Bank by Larry Bates (why your brokerage book value is not your ACB — and who the CRA holds responsible): https://amzn.to/4sia4p0 📖 Quit Like a Millionaire by Kristy Shen & Bryce Leung (RRSP, TFSA, and non-registered account strategy for Canadians): https://amzn.to/4sZnXsi 0:00 — Adjusted cost base (ACB) Canada: T5008 Box 20 blank explained 1:06 — What is ACB: why adjusted cost base only applies to non-registered accounts 1:55 — Brokerage book value vs ACB: why the CRA says do not trust Box 20 3:07 — Identical property rule Canada: weighted average cost method not FIFO 5:06 — T3 Box 42 return of capital: how it lowers your ACB every year 6:51 — Phantom distributions Canada: how to avoid double taxation on capital gains 7:21 — Superficial loss rule Canada: 61-day window RRSP TFSA affiliated persons 9:26 — CRA reassessment capital gains: T3 Box 42 error across 10 holdings 5 years 11:42 — Wealthsimple Tax Schedule 3: T5008 auto-import free filing Want the investing mindset behind why long-term discipline in your non-registered account compounds? 📚 The Psychology of Money by Morgan Housel — US: https://amzn.to/40KQsxH | CA: https://amzn.to/414Iu2N (paid link) When T5008 Box 20 is blank, the CRA can treat your full sale proceeds as profit — taxing money you already paid for. Adjusted cost base is the tax cost of every investment in a non-registered account, and tracking it is your responsibility, not your broker's. The CRA's own T5008 guide states Box 20 may or may not reflect your ACB. For Canadian ETF investors, the identical property rule requires the weighted average cost method after every purchase — Canada uses no FIFO, no LIFO. T3 Box 42 return of capital reduces your ACB dollar-for-dollar each year; a $350 return of capital adjustment combined with a $180 phantom distribution shifted the taxable gain on a 300-unit sale by $73 in the Tracker vs. Guesser example. Phantom distributions — capital gains your ETF realized internally but never paid in cash — must be added back to ACB or you pay tax on the same gain twice. The superficial loss rule runs 61 days total: sell at a loss and repurchase the same ETF inside your RRSP within 30 days, and the loss is denied permanently. The 50% capital gains inclusion rate applies to the 2025 tax year. Recalculate after every transaction. KEY NUMBERS: - Capital gains inclusion rate (2025 tax year): 50% - Superficial loss window: 30 days before AND after settlement date (61 days total) - Affiliated persons: you, your spouse or common-law partner, your RRSP, your TFSA - Repurchase inside a registered account: denied loss permanently gone — not addable to ACB - CRA reassessment window: 6 years in most cases - T3 Box 42: "Amount resulting in cost base adjustment" — reduces ACB dollar-for-dollar - Box 20 blank worst case: $8,400 in proceeds fully taxable as gain on a single sale RESOURCES: CRA Capital Gains Guide T4037 — 2025 (ACB rules, Schedule 3, superficial loss): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html Schedule 3 — Capital Gains or Losses (file with your 2025 T1 return): https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/5000-s3.html CRA My Account (retrieve prior-year T3 and T5008 slips): https://www.canada.ca/en/revenue-agency/services/e-services/digital-services-individuals/account-individuals.html I am not a registered financial advisor or tax professional. This video is general financial education broadcast to a wide audience. It is not tailored to your individual financial situation, needs, or objectives. Consult a qualified professional before making investment or tax decisions. As an Amazon Associate I earn from qualifying purchases. Description contains affiliate links — purchases through these links earn commission at no extra cost to you. NEXT → There is a mistake hiding inside your RRSP that costs the average Canadian about $3,000 a year. Most people make it without knowing. Subscribe so you catch it. 🎬 https://youtu.be/jVfo19wXGWk #AdjustedCostBase #CapitalGainsCanada #HudsonBayFinance