At tax time, the calculations associated with capital gains and losses can be an irritant. One of the more complex areas involves distribution-producing investments such as income trusts. It’s necessary to find the investment’s adjusted cost base (its purchase price for tax purposes) in order to calculate the gain or loss to be claimed by the taxpayer.

Finding the ACB can become tricky and time-consuming when distributions also involve a return of capital.

“The big issue with return of capital is that it reduces your ACB,” says Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth Management in Toronto. “So, someone has to track that. Unless an investor is keeping good records — all related statements — it really becomes a challenge for the accountant, advisor or the individual who is preparing his or her own tax return to come up with an accurate ACB.”

ACB Tracking Inc. , a Victoria-based firm launched in 2007 by two former investment industry professionals, offers a Web-based service ( that allows clients the ability to determine the adjusted cost base of any Canadian income trust, closed-end fund, split-share corporation or exchange-traded fund.

The firm has built a database that includes the full distribution history of each of these vehicles, and takes into account mergers, splits and consolidations that occurred in the investment vehicle’s history.

Advisors, accountants or individuals can punch in the relevant buying-and-selling history of any of these investment vehicles and the program will provide them with two reports: a brief one that indicates the correct ACB, and a second one that indicates how that number was arrived at by documenting every distribution or other activity that happened in the trust or fund during the period in which the investment was held.

Many advisors use ACB Tracking as a “value added” service for their clients, and a way of differentiating themselves in the market, says Kathy Hill, managing director of ACB Tracking’s Eastern Canadian operations based in Mississauga, Ont., and co-owner of the firm. Your clients can then take the ACB reports to their tax preparation professionals, who are saved the work of calculating the figures themselves at their hourly rates.

ACB Tracking sells calculations in bundles, from as few as 10 for $85 to as many as 500 for $1,495. The firm currently has an agreement with Toronto-based CIBC Wood Gundy, in which the brokerage subsidizes a portion of the cost for its advisors who want the service, Hill says. Other big brokerages are informing their advisors of ACB Tracking’s services, but aren’t picking up part of the cost.

ACB Tracking was launched two years ago by Hill and Mike Wooding, the managing director of the firm’s Western Canadian operations and its other co-owner. Hill is a former derivatives and options trader, and Wooding is a former full-service investment advisor. Most of the firm’s customers are accountants or brokers, with a small but greater-than-anticipated percentage of clients being individual investors.

Hill and Wooding go to great lengths to ensure the accuracy of the data, and are committed to making sure it’s up to date. All data is entered into the system within 24 hours of the trust’s or fund company’s announcement, and is double-checked by experienced investment industry professionals.

“We are really meticulous about the quality of the data,” Wooding says. “There’s no doubt in my mind that we have the cleanest data in the income-trust market.”

Adds Hill: “Trusts are a very specific market sector; it’s not homogenous at all. There are twists and different structures. We do the data-entry ourselves, and have other professionals check it.”

The company’s sales are growing quickly, says Hill, who anticipates the need for the service will only continue to increase.

One reason for that is that many trusts and funds maintained their distribution levels in 2008, although they may not have earned enough to cover the distribution. That means a greater portion of distributions represented return of capital.

As well, some trusts and funds have gone through as many as four name changes as a result of mergers or consolidations, which can make manual tracking of ACBs difficult.

ACB Tracking also accounts for so-called “phantom distributions,” in which investors receive additional units in lieu of cash distributions. The amount of the distribution, which has to be claimed on the unitholder’s tax return, even though no cash was received, has the effect of increasing the adjusted cost base.

@page_break@“Phantom distributions are poorly reported,” says Hill. “Yet, they increase ACB and save you capital gains in the end. They’re easily missed.”

ACB Tracking also offers a service called “Advise,” which allows registered users to build a list of funds and trusts they are interested in tracking. As new information comes in about those vehicles, and new data is entered into the database, ACB Tracking will contact clients alerting them of changes. IE