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T3, box 42, cost base adjustment


Is T3, box 42, cost base adjustment used in preparing T1 capital gains?

If so, why, when, and how?


The return of capital will decrease the adjusted cost base. It doesn’t automatically flow to S3 but must be taken into account when calculating a capital gain. I assume that the fund companies/brokers take this into account when calculating the ACB in their gains/loss reports but it would make T1 prep a tedious process to recalculate the actual ACB of mutual fund unit dispositions. In my experience, that cumulative amount in box 42 on the T3’s is information only. For most T3’s we don’t have enough information to rely on the cumulative return of capital.