Adjusted cost base is the CRA’s measure of what was paid for a capital property, including acquisition costs and improvements, and it is the starting point for calculating a capital gain or loss on disposition.

ACB is not always the original purchase price. It includes legal fees and commissions paid on acquisition, capital improvements made over the holding period, and adjustments required under the Income Tax Act when property changes hands through specific transactions, a Section 85 rollover, for example, or a gift between related parties.

The two most common errors are underreporting ACB, which inflates the capital gain and triggers more tax than is owed, and failing to track it over time so the correct number cannot be confirmed when the CRA requests it. For business owners, ACB becomes most consequential when selling shares of a corporation, disposing of investment property, or planning the use of the Lifetime Capital Gains Exemption, where the calculation must be precise before the transaction closes, not reconstructed after.

ACB calculations done incorrectly before a transaction closes cannot easily be corrected after. See how Wefinx approaches tax planning.

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