To calculate the ACB you will need to treat each subsequent purchase (reinvestment of dividends) as if you had bought the unit(s) normally. This is with the assumption that you declared the dividends as income in the year that you received them.
For instance:
- You initially bought 1000 shares of Company A for $10,000. Your ACB is $10/share to start.
- You then received dividends of $400 and you reported these on your income tax return for that tax year.
- The reinvestment plan purchased 30 shares for you with the $400 at a cost of $13.333 per share.
- You now own 1030 (1000+30) shares. And your total cost for tax purposes is $10,400 (10,000+400).
- Your ACB after this round of dividends is $10,400/1030 = 10.097 per share.
You will need to do this calculation for each share purchase via the DRIP - and any sales along the way - always in chronological order. And this will need to be done individually for each different company you own. I normally set up a spreadsheet for these so that I only need to enter the amounts reported and the spreadsheet will do the rest for me.
