Adjusted cost base is the running tax cost of capital property used to calculate a capital gain or loss.
Adjusted cost base is the cost amount of capital property after the required adjustments have been made under the tax rules.
Adjusted cost base is one of the most important record-keeping concepts in capital-gain reporting. If the cost base is wrong, the gain calculation can also be wrong.
The word adjusted matters. You do not simply look at the original purchase price and stop there. Depending on the asset and the events that affected it, the tax rules may require the cost base to be changed before the gain or loss is calculated.
$$ \text{Adjusted cost base} = \text{starting cost} + \text{required additions} - \text{required reductions} $$
That makes adjusted cost base a working tax figure, not just a casual memory of what an asset originally cost. It is used when determining whether a disposition produced a capital gain or capital loss.
| Item type | Often affects ACB? | Notes |
|---|---|---|
| Purchase price | Yes | This is the normal starting point |
| Acquisition costs such as commissions or legal fees | Often yes | CRA guidance commonly treats these as part of cost |
| Capital additions or improvements | Often yes | More common with property than with plain share purchases |
| Current maintenance or repair costs | Usually no | These are not normally added to ACB |
| Return of capital or other required tax adjustments | Can reduce ACB | Investment records need to be tracked carefully over time |
A taxpayer buys non-registered investments over time and later sells part of the holding. To calculate the capital gain properly, the taxpayer needs the correct adjusted cost base rather than just one remembered purchase price.
Adjusted cost base is not the same as current market value.
It is also not always identical to the first amount paid for the property, because later adjustments may be required.
It is not just a brokerage convenience number. For Canadian tax reporting, the taxpayer is still responsible for keeping adequate records when the ACB figure changes over time.
Why can the original purchase price be insufficient for tax reporting? Answer: Because the cost base may need adjustments before a gain or loss is calculated.
Is adjusted cost base the same as market value on the sale date? Answer: No. It is a tax-record figure used to calculate gain or loss, not the asset’s current price.
Adjusted cost base can become complex for reinvestments, return of capital, partial dispositions, corporate actions, and foreign-currency purchases, so detailed investment reporting may require careful record review.