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Adjusted Cost Base & Capital Gains

When you sell investments held in a taxable (non-registered) account, you owe tax on the gain — not on the whole proceeds. WealthPath uses your adjusted cost base (ACB) to figure out how much of a withdrawal is gain. This guide explains what ACB is, how to enter it, and how it flows through your projection.

Quick Start​

  1. Go to Assets and add or edit a Taxable (non-registered) account.
  2. Enter the Cost basis ($) — what you originally paid for the holding.
  3. That's it. WealthPath now models the embedded gain and taxes it as the account is drawn down in retirement.

If you leave Cost basis blank, WealthPath assumes it equals the current balance — i.e. no embedded gain — which is the same behaviour as before this field existed.

What Is Adjusted Cost Base?​

Your ACB is the total amount you paid to acquire an investment, including reinvested distributions and purchase costs (ITA 54). It's the baseline the Canada Revenue Agency uses to measure a capital gain:

Capital gain = Proceeds of disposition − (ACB + costs of disposition) (ITA 40(1)(a))

Only 50% of a capital gain is included in your taxable income — the inclusion rate (ITA 38(a)). WealthPath applies that inclusion rate automatically; you only need to supply the ACB.

Example​

You hold a brokerage account now worth $500,000. You originally invested $200,000. Your embedded unrealized gain is:

$500,000 − $200,000 = $300,000

When you eventually draw this account down, WealthPath realizes a proportional slice of that $300,000 gain, includes 50% of it in your income, and taxes it at your marginal rate for that year.

Where ACB Shows Up​

  • Assets form — the Cost basis ($) field appears only for taxable accounts. The placeholder shows your current balance (the default if left blank), and a live readout shows the resulting unrealized gain.
  • Assets list — taxable accounts with a recorded ACB below their balance show an ACB $X line under the balance and the embedded unrealized gain.
  • Projection & cash flow — realized gains during decumulation appear in your capital-gains tax, reducing after-tax spendable income.

Rules & Validation​

  • Cost basis must be between 0 and the current balance. WealthPath assumes long-only holdings, so an ACB above market value is rejected.
  • ACB applies to taxable accounts only. It is ignored for RRSP, TFSA, property, and other account types.
  • On the first death in a household, non-registered assets transfer to the survivor at their ACB (a spousal rollover under ITA 70(6)), so no gain is triggered by the transfer.

Simplifications (Current Limitations)​

WealthPath models a single average cost base per account. It does not yet model:

  • ACB adjustments for return of capital, reinvested distributions, or phantom income during the projection (ITA 53(1)) — the ACB you enter is treated as static, while the unrealized gain grows with returns.
  • Per-tax-lot tracking (each account has one blended ACB).
  • Gain-harvesting or ACB-reset strategies.

These are candidates for a future release.

Statutory References​

ConceptReference
Definition of adjusted cost baseITA 54
Adjustments to cost base (deferred)ITA 53(1)
Capital gain computationITA 40(1)(a)
50% inclusion rateITA 38(a)
Spousal rollover at ACBITA 70(6)