Q: I purchased 100 Bank of Nova Scotia dividend reinvestment plan (DRIP) common shares @ $30.60 in 1994 and have since added 300 shares through their Optional Cash Purchases at different intervals. My account today has a balance of almost 950 shares in total @ $77.00 (certificate shares and drip shares).
I would like to realize the capital gains on these shares this year since it will be my lowest income year. (Some dividend income estimated at less than $10,000 and a Defined Benefit pension of $23,000). The plan allows me to repurchase up to $20,000 per year, which I intend to do.
My concern is this: How do I calculate the capital gain on each share? What options do I have? I may be able to obtain some info from Computershare or the internet as I do not have every statement from 1994. Dividend income was paid every year.
A: Simple Suzanne. Donate everything to a charity so you don’t have to pay the tax. Alternatively, set the adjusted cost base to $0.00 so it is 100% taxable. CRA doesn’t mind if you overpay your taxes.
I’m just having a little fun. On a more serious note, here’s what you should do.
I spoke to a couple of accountants I consult with to determine the best approach to calculate capital gains when there are no records. The suggestions I received required way too much work.
Call Computershare in Montreal which is where they look after the Bank of Nova Scotia stock. For $150 plus tax and 20 business days they’ll check the records and calculate the capital gains for you. It is well worth the $150.
In your question, you also mentioned that you plan to buy back past pension service? If that’s the case and you’re using the stock sale to do this it’s likely you can deduct the $20,000 purchase from your income.
In addition, if you have an RRSP you could use some or all of your RRSP to buy back past pension. I mention this because it may make sense to only use the taxable portion of the stock sale to buy past pension, put the tax-free portion in a TFSA, and then use your RRSPs to buy back the remaining pension.
But I digress. To get back to your original question, call Computershare, pay the $150 and get it done. Simple and no worries with CRA.
Allan Norman is a Certified Financial Planner (CFP) with Atlantis Financial Inc. and an Investment Advisor (CIM) with Aligned Capital Partners Inc.
(This commentary is provided as a general source of information and is intended for Canadian residents only. Allan offers financial planning and insurance services through Atlantis Financial Inc. and securities-related investment advice through Aligned Capital Partners (ACPI). The views and opinions expressed are those of the author and may not reflect those of ACPI.)
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