Add capital gains? Transactions within pool vs. sales of pool units

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ringyFinance
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Add capital gains? Transactions within pool vs. sales of pool units

Post by ringyFinance »

I have a nonregistered Personal Portfolio Service (PPS) account with CIBC. It consists of pools (basically, funds). According to the following PPS Tax Reporting Guide, I get capital gains from sales of (i) securities within each pool and (ii) pool units:

http://www.cibc.com/content/dam/persona ... ide-en.pdf

It sucks that capital gains is taxed for both (i) and (ii), since the underlying assets are the same, but oh well. That's the law.

The Guide explains that capital gains from (i) are reported in a T3 while those from (ii) are reported in the CIBC version of a series of T5008 slips, which is a table of transactions dubbed "Client Tax Statement". This table lists the transactions, but kindly provides the total capital gains, taking into account the Adjusted Cost Base (ACB). The T3 also comes accompanied with a similar table atop the actual slips themselves, referred to in the Guide as a "statement of dispositions". Since I don't have any other nonregistered investment accounts, I take the CIBC determination of capital gains with ACB as correct, i.e., no need to reconcile the ownership of a pool in more than one account.

This is the first year that I downloaded my returns data from CRA, including data for (i) and (ii), and I'm wondering if it is OK to simply trust StudioTax's automatic handling of the capital gains from both dispositions. The capital gains figure from (i) shows up in Schedule 3, under line 176 which is specifically for capital gains from T3's. Capital gains from (ii) shows up in Schedule 3 under "Publicly traded shares, mutual fund units, deferral of eligible small business corporation shares, and other shares". Looking at the rest of Schedule 3, it seems that the two capital figures are simply summed up.

Another source of confusion for me is that box 42 on the T3 triggers a StudioTax warning that the figure is not used directly anywhere. The warning refers to an explanation that the figure is used to adjust my cost base. However, this is already accounted for, according to the aforementioned Guide's explanation of box 42: "The adjusted cost of units of any pools distributing return of capital has been recalculated on your attached statement of dispositions." The confusing thing is that the quote talks about *units* of a pool, but the very same Guide also described the T3 as for sales of units *within* the pool [pool units are suppose to be reported by (ii), not (i)]. Is simply a wording slip on the part of the Guide? The CIBC phone help folks get very stand-off-ish when asked about details of reporting.
Last edited by ringyFinance on 25 Apr 2017 01:42, edited 1 time in total.
Spudd
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Re: Add capital gains? Transactions within pool vs. sales of pool units

Post by Spudd »

For (ii), are the cost bases filled in? Normally the T5008 does not show the cost base and you need to fill it in yourself - if you don't, you'll pay tax on the entire amount of the proceeds of the sale instead of just the profit. (ie. if you sold $1000 of units that you originally paid $500 for, you should only pay tax on the $500 profit, not the entire $1000.)

I don't know the answer as to your box 42 query. As an ETF investor I need to go back and apply that box 42 number directly to my ACB. But I suspect with your personal portfolio situation they may very well do that for you. Do you have a personal advisor you could ask rather than talking to the general help desk?
ringyFinance
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Re: Add capital gains? Transactions within pool vs. sales of pool units

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No, the cost bases are not filled in. But the Client Tax Statement isn't quite a T5008. It provides a Totals row with an entry under the Gain(Loss) column. The notification that gives me hope that they account for this is: "The average cost is provided to assist you in calculating your gains and losses, however the suitability of these amounts for tax purposes is not guaranteed. For example, if you have units of an identical fund in more than one non-registered account you are generally required to consider all such units when calculating the average cost of each fund. Any capital loss may be nil for income tax purpose if you...purchased units of an identical fund 30 days before or after the date of the redemption."

If I have to calculate the ACB myself, I'd have to go back decades. I never really got the gist of what it intuitively meant until a (very) few years ago. I was hoping that having all my investments with CIBC, with only 1 non-registered investment account, would save me from that.

I have found that my personal advisor has been also standoff-ish about specific tax advice like this in the past. Drives me crazy, as my tax situation is the simplest possible. However, my advisor was recently replaced. I have pinged him while he was away, and will ping again, if I can't find the answer myself.
Spudd
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Re: Add capital gains? Transactions within pool vs. sales of pool units

Post by Spudd »

Just make sure you have both cost base and proceeds filled in in your tax software before you submit it, or you'll be overpaying tax to a large degree.
ringyFinance
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Re: Add capital gains? Transactions within pool vs. sales of pool units

Post by ringyFinance »

Thanks, Spudd.

The T3 data doesn't have a proceeds or cost base field. It only has a capital gains field.

For the T5008 (equivalent) data, the "Proceeds from Sale" field of the hard copy shows up in the electronic form in the "Proceeds of disposition or settlement amount" (seems to make sense). The "Average Cost" field of the hard copy shows up in the electronic form in the "Cost or book value" field. The "Proceeds" data is always a bit less than the "Cost" data. Hope that makes sense!
Spudd
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Re: Add capital gains? Transactions within pool vs. sales of pool units

Post by Spudd »

Sounds good!
ringyFinance
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Re: Add capital gains? Transactions within pool vs. sales of pool units

Post by ringyFinance »

Thanks, Spudd.
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