Return of capital cost basis calculator (US and Canada)
Part of your fund's payout was your own money handed back. That part lowers what your shares cost you. Paste the payouts and see your real cost per share, and what a sale really made or lost.
| Payout | Paid per share | Return of capital | Cost per share after |
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How it works: a fund's payout can be split in two. One part is taxed in the year you get it. The other part, return of capital (ROC), is your own money handed back, so it is not taxed then. Instead it lowers what your shares cost you. Adjusted cost per share = what you paid − every ROC part so far. It can't go below zero: once it hits zero, any more ROC counts as a capital gain in the year you get it. When you sell, gain or loss = (sale price − adjusted cost) × shares. The rules for the US and Canada work the same way here. Fees are left out.
Where to find the return-of-capital part
The fund tells you after the year ends. In the US, it is the "nondividend distributions" box (box 3) on your 1099-DIV. In Canada, it is the "return of capital" box (box 42) on your T3 slip, and the cost you track is called your ACB (adjusted cost base). Many funds also post a yearly breakdown on their website, often as a % of each payout. You can paste that straight in: "0.25, 80%" works the same as "0.25, 0.20". In a TFSA, RRSP or IRA you don't track any of this for tax. To see how cost per share works for options sellers, read cost basis after assignment.
Why ROC matters when you sell
Here is the trap. Say you forget the ROC step and use the price you paid. Your gain on the sale then looks smaller than it is, or your loss looks bigger. The tax office works from the adjusted number. This page shows both, so you can see the size of the gap. ROC is not always bad news. Some covered call ETFs pay ROC because the premium they collect is taxed that way. But a lot of ROC can also mean the fund is handing back your money. Compare it with the NAV erosion calculator to see if the share price held up. The same cost-per-share habit is the heart of the wheel strategy.
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