17 What are the rules on identical properties? Why were these rules created?

Identical properties are when each property in the group is the same as all the others. An example would be shares of the same class of the capital stock of a corporation or units of a mutual fund trust.

You may buy and sell several identical properties at different prices over a period of time. If this occurs, you need to calculate the average cost of each property in the group at the time of each purchase to determine your adjusted cost base (ACB).

These rules were implemented to clarify the ACB calculation – and to limit a shareholders ability to manipulate this calculation – when a shareholder sells property.

Under the identical property rules, the ACB is calculated as follows:

1st purchase of property:  ACB per unit is equal to the total amount paid for the property divided by the number of units purchased.

2nd purchase of identical property: ACB is equal to the total amount paid for the property (1st and 2nd purchase), divided by the total number of units (1st and 2nd purchase) purchased.

Let’s take a look at an example.  During year 1, Trevor purchased and sold shares of Matrix Corporation. The chart below shows how the adjusted cost base (ACB) per share changes after each transaction.

Interactive content (Author: Melany Rivera Moran, January 2020)

References and Resources:

• ITA 47
• Article – “Identical Properties” (Author: Government of Canada)
• Article – “Reporting Capital Gains and Losses From Identical Property” (Author: TurboTax)
• Article – “Capital Gains 2018” (Author: HTK Academy)

January 2020

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