Adjusted Cost Base


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Adjusted Cost Base

In Canadian taxes, a calculation of the cost of an asset that includes expenditures indirectly related to the purchase price of the asset. For example, the adjusted cost base may include improvements made to real estate or commissions paid for a security. It is important to note that these expenses may be required expenses (one must pay commissions to brokers if one wishes to trade on the stock market), but they are not included in the purchase price, per se. The ACB may also include dividends that are reinvested. In Canada, one is liable for capital gains taxes on an asset sold for a price greater than the adjusted cost base.
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References in periodicals archive ?
If an election was made, the adjusted cost base of the property is increased tax-free, consequently reducing future capital gains on the disposition of the property.
After receiving the initial tax benefit, he transfers the FTLP or the mutual fund shares into his company and elects under subsection 85(1) of the Income Tax Act to transfer the investment at his adjusted cost base of approximately zero.
The reasons provided above appear to be tax related (allocation of income and adjustments to the adjusted cost base) versus "sound business reasons".
Any proceeds returned by the holding company to the Canadian shareholder in excess of the adjusted cost base of the shares would create a capital gain that could not be reduced to take into account foreign tax paid in respect of the gain.
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