1. What Is Adjusted Cost Base?

Adjusted Cost Base (ACB) is the average cost per unit of an investment, calculated by dividing the total cost of all units by the total number of units owned. It's used for tax purposes when calculating capital gains or losses.

2. How Does The Calculator Work?

The calculator uses the ACB formula:

Where:

• \( ACB \) — Adjusted Cost Base per unit (currency/unit)
• \( \text{Total Cost} \) — Total cost of all units purchased (currency)
• \( \text{Total Units} \) — Total number of units owned (units)

Explanation: This calculation provides the average cost per unit, which is essential for determining the cost basis when selling investments for capital gains tax calculations.

3. Importance Of ACB Calculation

Details: Accurate ACB calculation is crucial for proper tax reporting, determining capital gains or losses, and making informed investment decisions about when to buy or sell assets.

4. Using The Calculator

Tips: Enter the total cost of all units purchased and the total number of units owned. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: Why Is ACB Important For Investors?
A: ACB determines the cost basis for tax purposes when calculating capital gains or losses on investment sales, directly impacting tax liability.

Q2: How Does ACB Differ From Purchase Price?
A: ACB represents the average cost per unit across all purchases, while purchase price refers to the cost of individual transactions.

Q3: When Should ACB Be Updated?
A: ACB should be recalculated after every purchase of additional units to maintain an accurate average cost basis.

Q4: Are There Special Rules For ACB Calculation?
A: Some jurisdictions have specific rules for calculating ACB, particularly regarding reinvested dividends or return of capital distributions.

Q5: How Does ACB Affect Investment Decisions?
A: Knowing your ACB helps determine whether selling units will result in a capital gain or loss, influencing timing of sales for tax optimization.