8.5 What are the rules on identical properties? Why were these rules created?
Shelvin Chand
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 shareholder’s ability to manipulate this calculation – when a shareholder sells the 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.
Example 8.5.1
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.
Example of sale and purchase of identical properties:
| Transaction | A: Cost ($) | B: # of Shares | A / B: Adjusted Cost Base per share ($) |
|---|---|---|---|
| January 1, Year 1: Purchased shares at a price of $25.00 per share. |
25,000 | 1,000 | 25.00 |
| March 31, Year 1: Purchased shares at a price of $22.50 per share. |
24,998 | 1,111 | |
| New Average Cost per Share | 49,998 | 2,111 | 23.68 |
| June 2, Year 1: Sold shares at a price of $27.50 per share. |
23,708 | 1,001 | |
| New Average Cost per Share | 26,290 | 1,110 | 23.68 |
| September 15, Year 1: Sold shares at a price of $17.75 per share. |
14,447 | 610 | |
| New Average Cost per Share | 11,842 | 500 | 23.68 |
| December 27, Year 1: Purchased shares at a price of $16.25 per share. |
8,125 | 500 | |
| New Average Cost per Share | 19,967 | 1,000 | 19.97 |
Interactive Content
Author: Melany Rivera Moran, January 2020
References and Resources
“What are the rules on identical properties? Why were these rules created?” from Intermediate Canadian Tax Copyright © 2021 by Shelvin Chand is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
