Adjusting ADJUSTED COST BASE

[caricole]

A little reminder wih the T3's coming soon

Of course, all Dividend, Interest, Other income, Foreigne income shall be reported on the appropriate lines

Trust funds, Mutual Funds and Ishares often have an amount in BOX 42 (return of capital)

It is money received that has not to be reported but it REDUCES the ACB....most people know it and are familiar with doing this

It is the otherone Some Ishares....BOX 21....capital gain

Has to be reported on your incometaxform...but you did NOT RECEIVE IT and are taxed on it

Amount of BOX 21...capital Gain on Ishares «INCREASES YOUR ADJUSTED COST BASE»

You have been taxed on it....so by INCREASING the cost base you wil not be taxed twice on the same amount on disposition

I was surprised to find out a TAX ASSESSOR did not know about it.....GRRRRRRRR

[Pickles]

Your garish colours, incessant bolding, rude use of capitals and and over-use of smilies are giving me a headache.

I guess you figure all the gizmos will make people pay attention to your posts. In reality, it is likely to have the opposite effect. Our software gives members the capability of "ignoring" everything a specified member posts (by designating the person "a foe" in user preferences).

You have just become the only person on my "ignore" list, not because you are a foe but simply because of the extremely annoying way you post. Good luck on the forum.

[caricole]

You have just become the only person on my "ignore" list

Thank you.....just dont forget..

[like_to_retire]

It is the otherone Some Ishares....BOX 21....capital gain

Has to be reported on your incometaxform...but you did NOT RECEIVE IT and are taxed on it

Amount of BOX 21...capital Gain on Ishares «INCREASES YOUR ADJUSTED COST BASE»

You have been taxed on it....so by INCREASING the cost base you wil not be taxed twice on the same amount on disposition

I was surprised to find out a TAX ASSESSOR did not know about it.....GRRRRRRRR

I'm afraid you may be a bit confused.

The capital gains amount in box 21 on your T3 is the sum of the capital gains portion of your regular distributions, plus the capital gains portion of the notional re-invested portion you may or may not receive in December from ishares.

It is only the notional portion that adds to the cost base - you cannot simply add box 21 to your cost base. They unfortunately don't break-out the two types of distributions on the T3, so it is up to you to look back to your December's financial statement to obtain the amount (if any) of the re-invested distribution or you can calculate it by going to the ishares web site and finding the notional re-invested amount for the year.

The ishares tax comments specifically lays this out: Reinvested distributions are not paid in cash but instead remain invested in the Fund. To recognize that these distributions have been allocated to investors for tax purposes, the amounts of these distributions should be added to the adjusted cost base of the units held.

A perfect example is 2011 XIC where the re-invested notional distribution was zero (so no adjustment to cost base), but the regular distributions contained 0.00215 capital gain per share. This 0.00215 was not notional and did not result in purchase of any shares and so is not to be added to the cost base - but will show in box 21 of the T3. If you add it to your cost base, you're avoiding taxes.

ltr

[Insomniac]

If you add it to your cost base, you're avoiding taxes.
ltr

I think you meant evading taxes.

Thank you for clearing up the confusion. This post is a good reminder for me: I have to get on with creating a spreadsheet to keep track of the cap gains on those ETFs not in registered accounts.

[like_to_retire]

I think you meant evading taxes.

hehe, yeah.

ltr

[caricole]

Nobody is avoiding or evading taxes

I stated....Box 21, you report it (on Schedule 3 ..line 167)

And whatever is reported as capital gain on your IShares....ADD to ACV to avoid bieng taxed twice on the same amount

I include their text which explains this portion

http://ca.ishares.com/misc/faq.htm?ls=true&c=ca&l=en

Distributions & Tax (top)
Q. Do iShares Funds pay distributions?
A. As with most mutual funds, iShares funds distribute income and capital gains to unitholders. These distributions are taxable to investors whether they are paid in cash or reinvested in the fund. Please check the individual fund for specific distribution dates and tax information.

Your broker is responsible for determining whether to withhold tax on any distribution paid to you. Your broker is also responsible for providing all required tax reporting, including T3 forms. In Canada, BlackRock Canada provides brokerage firms with the information that they need to prepare your T3 (such as the proportionate share of distributions attributable to dividends, income, capital gains, return of capital or foreign tax withheld) through the facilities of Computershare Investor Services Inc. (the funds' transfer agent ) and CDS Clearing and Depository Services Inc. (CDS). This is different from a typical mutual fund, where the mutual fund company maintains investor accounts and provides tax reporting directly to unitholders. (hide answer)
Q. What is the difference between cash distributions and reinvested distributions?
A. iShares funds may pay distributions to unitholders in cash or may reinvest the distribution amount in the fund. Generally, net income and dividends received by the iShares funds are distributed to unitholders in cash and net realized capital gains are reinvested in the fund.

Similar to mutual funds, reinvested distributions are reinvested on the unitholder's behalf in additional units of the fund. With mutual funds, this results in an increase in the number of units held by each unitholder and a corresponding drop in net asset value (NAV) per unit, such that there is no change in the total value of the holdings resulting from the distribution. With iShares funds, immediately following a reinvested distribution, the number of units outstanding is consolidated so that the number of units held by investors is the same as before the capital gains distribution. For iShares funds, unitholders will not see an increase in the number of units held, and will NOT see a change in the NAV per unit. Therefore, like mutual funds, a reinvested distribution for an iShares fund results in no change in the total value of the holdings resulting from the distribution.

For reinvested distributions for an iShares fund, an investor can increase the adjusted cost base (ACB) of the iShares fund by the amount of the reinvested distribution. This adjustment means that any gain realized on a subsequent sale of units will, in effect, be reduced by the amount of the distribution. In this way, you do not pay tax twice on the distribution. In many cases, your brokerage firm will automatically change the ACB to reflect reinvested distributions on iShares funds. However, not all brokerage firms provide this service.

More clear ????

[DavidR]

... whatever is reported as capital gain on your IShares....ADD to ACV to avoid bieng taxed twice on the same amount

<snip>

For reinvested distributions for an iShares fund, an investor can increase the adjusted cost base (ACB) of the iShares fund by the amount of the reinvested distribution. This adjustment means that any gain realized on a subsequent sale of units will, in effect, be reduced by the amount of the distribution. In this way, you do not pay tax twice on the distribution. In many cases, your brokerage firm will automatically change the ACB to reflect reinvested distributions on iShares funds. However, not all brokerage firms provide this service.

More clear ????

Still Wrong.

You do NOT add the capital gain amount to your ACB.
You only add REINVESTED distributions.
They are not the same thing. And, for many of the different funds, they are not the same AMOUNT.

Not all Capital gains were reinvested. Some were distributed in Cash during the year.
http://ca.ishares.com/content/stream.jsp?url=/content/en_ca/repository/resource/2011_final_tax_character_en.pdf&mimeType=application/pdf

[like_to_retire]

And whatever is reported as capital gain on your IShares....ADD to ACV to avoid bieng taxed twice on the same amount

More clear ????

I'm afraid you're incorrect in your assumption that whatever is reported as capital gains in box 21 is added to your cost base.

As I stated before, and backed by ishares themselves, only the: Reinvested distributions are not paid in cash but instead remain invested in the Fund. To recognize that these distributions have been allocated to investors for tax purposes, the amounts of these distributions should be added to the adjusted cost base of the units held..

For example, the re-invested portion of XIC is spelled out each year and can be seen on their web site for 2011 here. Note the re-invested portion shown is 0.0000 and the reference to footnote 2 that specifies (2) Reinvested distributions are not paid in cash but instead remain invested in the Fund. To recognize that these distributions have been allocated to investors for tax purposes, the amounts of these distributions should be added to the adjusted cost base of the units held.. There is no re-invested portion for 2011 and so no amount is added to the cost base.

Now see the portion of capital gains of 0.00215 that will be in box 21. This is the portion that has been paid in cash as a percentage of the quarterly cash dividends. These cash dividends tax characteristics are a mix of dividends, capital gains, income, foreign income, etc, that have no effect on the cost base. No new units have been purchased with these distributions, so no effect on cost base. Only the one time re-invested distributions have an effect on cost base. If you add box 21 you are evading taxes.

More clear????

Actually, back in 2007, Barclays made a mistake on their T3 slips, and forgot to include the notional re-invested distribution. They corrected the error by issuing a second T3 that year that included the notional portion only. It provided a rare opportunity to see this once a year re-invested notional amount broken out into its different tax characteristics (i.e. some capital gain, some dividend, some interest, etc). (this is the portion that affects cost base).

The thread on this can be followed here if you're interested.

ltr

[Jaunty]

There is also a 4 page discussion here http://www.financialwebring.org/forum/viewtopic.php?f=33&t=106824&hilit=iUnit+distributions about iShare distributions in 2008 that may be helpful as people work to keep their records accurate.

[queerasmoi]

The form attached to my 2010 Questrade T3 for trusts breaks out each individual periodic distribution by the type of income. It didn't contain any capital gains, but it would make the reinvested distributions moderately easier to spot - compare the reported distribution on any given month to the actual cash you received. If a CG is reported in a month where you did not actually receive as much money as they list on the slip, the difference is a reinvested amount and you increase ACB by that much.

Actually 2009 T3 from Credential is a useful example. The only CG distribution that appears is for 189 shares of iShares XSB on 12/30/2009, in the amount of $13.35 (Box 21). The same distribution contains $50.00 of other income (box 26) and -$7.76 (negative) in Box 42 (amount resulting in cost base adjustment), for a total of $55.60 which is exactly how much cash they gave me on that day.

Wait what? Box 42 is usually used to report return of capital which pushes ACB down. What they actually did was simultaneously account for $13.35 in reinvested capital gains (decreases ACB) and $5.59 of cash RoC (increases) in the same distribution, and put the final amount of the ACB adjustment in box 42. So you can enter this into Quicken as if you received $13.35 cash CG, $50.00 interest and -$7.76 return of capital, and the numbers will balance out.

If this is the standard way of accounting for it, then in general Box 42 should tell you the net ACB adjustment after taking into account both RoC and reinvested CG.

[IdOp]

Wait what? Box 42 is usually used to report return of capital which pushes ACB down. What they actually did was simultaneously account for $13.35 in reinvested capital gains (decreases ACB) and $5.59 of cash RoC (increases) in the same distribution, and put the final amount of the ACB adjustment in box 42. So you can enter this into Quicken as if you received $13.35 cash CG, $50.00 interest and -$7.76 return of capital, and the numbers will balance out.

I think the two bolded parts should be switched. Do you agree? It's easy to mix this up when they are putting a negative number in box 42.

[like_to_retire]

reinvested capital gains (decreases ACB) and $5.59 of cash RoC (increases) in the same distribution

No, re-invested amounts increase the cost base, and ROC decreases the cost base.

Also note that re-invested amounts aren't necessarily capital gains. The re-invested amount can have any tax characteristic.

ltr

[caricole]

The links provided by Jaunty & queeresmoi (thanks) makes it even more clear

For IShares only, because the quantity owned does not change

Box 42 ...ROC decreases ACB

Box 26 21...CG increases ACB

The drawback....you can adjust your ACB only in Mid Apr. after receiving your T3's

I was also involved in the mixup at TDW the year they had to issu ADDITIONAL T3....they were not AMENDED T3

Usualy I adjust dated Dec31....new ACB dated Jan 1

If you sell between Jan and April...you have to wait till Apr±15 to accuratly calculate your CG or CL

[like_to_retire]

Box 26...CG increases ACB

No, Box 26 on a T3 is Other Income. It does not change the ACB.

Box 21, is capital gain that was paid in cash in each normal distribution, plus the amount of capital gain contained in the re-invested amount if issued that year.. If there was no re-invested amount issued for the year for the specific ishare security, then there is no adjustment to cost base for Box 21.

There is only one thing that increases the cost base for an ishare, and that's the re-invested amount issued in december each year. Many years it's zero. When it's non-zero, it is not broken out on the T3 and the only way to know the amount is to go to the ishares site and find the re-invested amount.

ltr

[caricole]

Did the correction...thanks..

[queerasmoi]

I wrote that far too early in the morning. Yes I switched increase and decrease in that sentence.

Reinvested income isn't always capital gains, but it would seem that for Canadian domiciled ETFs, it always is. The other types of income are almost invariably distributed as cash.

What I was trying to get across is - the total adjustment to ACB for an ETF is all in one box, including the RoC and reinvested CG.

[caricole]

What I was trying to get across is - the total adjustment to ACB for an ETF is all in one box, including the RoC and reinvested CG.

Probably in your case with your broker...I had the opposite

An amount in box 21 and onother amount in box 42...but the T3 was made out for 2 differend IShares at the same T3

I had to go to the IShares links to figure out what belonged to one and what belonged to the other in order to do the adjustments of the ACB

[queerasmoi]

Probably in your case with your broker...I had the opposite

An amount in box 21 and onother amount in box 42...but the T3 was made out for 2 differend IShares at the same T3

I had to go to the IShares links to figure out what belonged to one and what belonged to the other in order to do the adjustments of the ACB

Right, the T3 adds it all up into one box, but my experience with at least Questrade and Credential is that in the same envelope as the T3 they print out a page that lists each individual distribution broken out by tax characteristics.

[adrian2]

Reinvested income isn't always capital gains, but it would seem that for Canadian domiciled ETFs, it always is.

I like to be correct to the penny. For the iShares Small Cap (XCS), the 2011 per unit info is here.

Distributions per Unit
Reinvested = $0.81689
Annual Capital Gains = $0.81738
Annual Return of Capital = $0.01730

Figure out the pattern and why...
Rinse and repeat for other Canadian domiciled iShares products.

[caricole]

adrian2....I like to be correct to the penny. For the iShares Small Cap (XCS), the 2011 per unit info is here.

The amounts from the table should be on your T3 for your XCS, if held full 12 mnonths in 2011...coming soon

The bottom of your link

PS:

You forgot to show the dividends...to me , everything balances..

[like_to_retire]

to me , everything balances

Again, I'm afraid, you're incorrect.

As I've pointed out before, you cannot add the Box 21 to your cost base.

You only add the re-invested distribution to your cost base.

Re-read the note below from ishares site:

Note (2) Reinvested distributions are not paid in cash but instead remain invested in the Fund. To recognize that these distributions have been allocated to investors for tax purposes, the amounts of these distributions should be added to the adjusted cost base of the units held.


The jpg below shows the highlighted re-invested amount for XCS is 0.81689. That is added to your cost base (times the number of shares you own). You can see the Note 2 reference.

Now look at the distribution info for XCS and see the highlighted capital gain Box 21. It's not the same as the re-invested amount. That's because Box 21 is a sum of re-invested amount and capital gains from distributions.

You cannot add Box 21 to your cost base.

ltr

[caricole]

like_to_retire....Now look at the distribution info for XCS and see the highlighted capital gain Box 21. It's not the same as the re-invested amount. That's because Box 21 is a sum of re-invested amount and capital gains from distributions.

The reason is simple

First table goes till Dec 23th

Bottom table is published around Feb 15 after the rebalacing dated Dec 31TH.....and is for incomtax purpose

You could call it «Rebalanced year-end statement for tax purposes»it has always been like this, every year for every IShare

I ad box 21 to my ACB...in order not to be taxed twice....anybody doing it differend.....fine with me

[like_to_retire]

The reason is simple

First table goes till Dec 23th

Bottom table is published around Feb 15 after the rebalacing dated Dec 31TH.....and is for incomtax purpose

You could call it «Rebalanced year-end statement for tax purposes»it has always been like this,

Sorry, you couldn't be more wrong. Those tables show as Distributions Detail as of 22-Mar-2012. They are quite accurate.

I don't have a horse in this race, so I don't really care, I'm just trying to help. I don't want others to make the same mistake you're making, so I made my posts and others can act as they see fit.

ltr

[adrian2]

The reason is simple

First table goes till Dec 23th

Wrong reason.

I ad box 21 to my ACB...in order not to be taxed twice....anybody doing it differend.....fine with me

You are doing it wrong.

If using Quicken or similar, what you need to do is twofold:
1. balance the distributions paid in cash throughout the year with the information in the second table
2. balance the reinvested distribution (which you did not see in cash) with the information in both tables

In the end, for all amounts of 2011, the cost base needs to be adjusted by
- adding 0.81689 (NOT 0.81738)
- subtracting 0.01730 (only if you have entered it somehow as a cash distribution throughout the year)