RE:QuestionRickandMorty wrote: If this dips down a little more I am definitely buying more. There is something I am not sure about. Using prices that are not my actual, but as an example. I previously bought 10,0000 shares at 50 cents. Now I buy 10,000 more shares at $1. My account now shows I hold 20,000 shares at an average price of 75 cents. The next time I sell shares, am I selling my shares based on the average 75 cents cost, or does the system sell my earlier purchased shares first, or my more recently purchased shares first? The reason I am asking is I think I would want to sell the shares purchased at the higher price first, and hold onto the shares purchased at the lower price longer.
Hi R&M,
I assume you are in Canada. Let's take your example further.
Your average cost base (ACB) for your 20,000 shares is 75 cents.
This equals a book value of $15,000.
If you sell 5000 shares at $2 for exampe, your proceeds are $10,000 (5000 x $2).
Your cost on those 5000 shares is $3,750 ($0.75 x 5000).
Your capital gain is $6,250 ($10,000 - $3,750).
In Canada, 50% of that (i.e., $3,125, 0.5 x $6250) is taxable while the remaining amount is your to do what you want and is not taxed.
In your account you should then have 15,000 shares remaining, with an ACB of 0.75 and a book value of $11,250 (0.75 x 15,000 or $15,000 (original book value) - $3,750 (cost base of sold shares).
Of course your trading brokerage house will take their commissions on the purchase and sale of those shares which I did not include.
Hope this makes sense.
(Note: Based on discussions with my accountant and some CFOs I know, Trudeau (Liberal government) may increase the taxable income rate to 75% of proceeds to collect revenue to pay for all those COVID billions he doled out in 2020 and 2021. They think it will be either this Fall or the March 2022 budget.) GLTY
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