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March-23-15

Book Value Blunders

Even the big bank discount brokerages mess up sometimes, and RBC Direct Investing’s Summary of Security Dispositions is a perfect example. Each year, DIY investors unknowingly rely on this summary while preparing their tax returns. The report is filled with plenty of disclaimers, indemnifying RBC of any errors or omissions contained within. Fair enough – in some cases, RBC would not have all of the information necessary to accurately track their clients’ book values. In the case of US-dollar securities, however, it’s as if they couldn’t even be bothered to try.

A former client of our DIY Investor Service (and an RBC Direct Investing client) faxed me a summary of their security dispositions for 2014 (I’ve included the details in the chart below). It would appear that the client has a $10,238.62 capital gain that they must claim on their 2014 tax return. After closer inspection, it became apparent that the amounts on the report were quoted in US dollars (which were unacceptable for tax purposes).

Now comes the fun part. The DIY investor would need to compile all of the past transactions for VTI and convert the amounts to Canadian dollars in order to calculate their true capital gain or loss. Let’s get started...

Don’t judge a book value by its cover

On January 29, 2014, the investor sold 325 shares of VTI for $30,754.11 US dollars. Using the Bank of Canada noon exchange rate on the settlement date of 0.8946, we can make the adjustment to $34,377.50 Canadian dollars ($30,754.11 ÷ 0.8946).

On October 26, 2011, the investor purchased 2,130 shares of VTI for $134,455.34 US dollars. Using the same method as above, we adjust the US dollar purchase amount to $135,813.47 Canadian dollars ($134,455.34 ÷ 0.9900). This gives us a book value per share of $63.76219 Canadian dollars ($135,813.47 ÷ 2,130 shares). If we multiply this value by the 325 shares that were sold in 2014, we end up with a book value for the transaction of $20,722.71 Canadian dollars ($63.76219 × 325 shares).

After the adjustment, the Canadian dollar proceeds from the sale and book value of the shares sold were $34,377.50 and $20,722.71 respectively. This resulted in a capital gain of $13,654.79 Canadian dollars. Without accounting for the adjustment, the investor would have understated their realized capital gain to the Canada Revenue Agency by $3,416.17 Canadian dollars ($13,654.79 - $10,238.62).

I certainly prefer not to jump to conclusions, but I think it’s safe to say that most DIY investors are not making these currency adjustments. If this is the case, RBC Direct Investing needs to up its game and start helping their clients stay out of trouble with the CRA.

http://www.rbcds.com/TaxReporting/faq-usdollar.html

By: Justin Bender | 0 comments
March-05-15

PWL 2014 Tax Slip Checklist

By now, many of our clients’ mailboxes are overflowing with tax slips from various companies. The 2014 tax year is an especially daunting one for our clients: PWL’s transition from TD Waterhouse Institutional Services to National Bank Correspondent Network means clients may receive two T3 or T5 slips (one from each brokerage) for a number of securities, which is sure to add to the complexity. 

To make things easier, our Toronto team compiles customized tax slip checklists for every client with a taxable personal account: you’ll receive this by email shortly. As you receive your T-slips, simply verify the security name and account number (which you’ll find on the tax slip itself, or on the investment summary) against the information on your PWL 2014 Tax Slip Checklist. Below I’ve included an example of an NBCN Investment Income Summary and how it relates to the checklist.  

Some tax slips and reports (such as T3 slips and the Realized Capital Gains & Losses Report) will arrive later in March or early April. If you are still missing any items by the beginning of April, please contact any member of our team so we can retrieve a duplicate slip for you:

Justin Bender: jbender@pwlcapital.com

Dan Bortolotti: dbortolotti@pwlcapital.com

Amanda Dalziel: adalziel@pwlcapital.com

Shannon Dalziel: sdalziel@pwlcapital.com

By: Justin Bender | 2 comments