Selling Part of Your Position: How ACB Works on a Partial Stock Sale in Ontario

Most investors eventually sell only part of a holding — a hundred shares out of three hundred, or a slice of a mutual fund position to cover a tax bill or rebalance a portfolio. When you do, the Canada Revenue Agency doesn't let you pick which shares you're "selling" for tax purposes. Instead, calculating your ACB on a partial sale relies on a pooling rule that blends every purchase of that security into a single average cost.

Getting this wrong is one of the most common errors self-directed investors make on their tax returns. It usually happens because people think in "lots" — the shares they bought in one year versus the ones bought years later — when the tax rules require you to think in averages.

This article walks through how the averaging rule works, what counts as the "same" property for this purpose, and how to work through a partial sale step by step.

Identical Properties Are Pooled, Not Tracked Separately

For Canadian tax purposes, shares of the same class in the same corporation are treated as "identical properties," and identical properties are pooled together into a single adjusted cost base. It doesn't matter that you bought some shares in one purchase and more in a later purchase at a different price — for tax purposes, you hold one combined position with a single blended average cost per share.

This is different from the "specific identification" or FIFO approaches used in some other contexts. Canada's approach is an average cost method: every time you buy more of the same security, your ACB per share is recalculated across your entire holding.

How the Averaging Rule Works on a Sale

When you sell only part of your position, the capital gain or loss is calculated as:

1. Take your total ACB (the average cost per share, multiplied by the total number of shares you hold immediately before the sale).
2. Multiply the average cost per share by the number of shares you are selling.
3. Subtract that amount from your proceeds of disposition (net of selling costs) to find your capital gain or loss.

Your remaining shares keep the same average cost per share — selling part of a position doesn't change the ACB of what's left.

Example (illustrative only — use your actual numbers):

• You bought 100 shares at $20 and later 150 shares at $30.
• Total cost: $2,000 + $4,500 = $6,500 for 250 shares.
• Average ACB per share: $6,500 ÷ 250 = $26.
• You sell 80 shares at $40 each: proceeds of $3,200.
• ACB used: 80 × $26 = $2,080.
• Capital gain: $3,200 − $2,080 = $1,120.
• Your remaining 170 shares still carry an ACB of $26 per share.

What Can Move Your Average ACB Over Time

Several events adjust the pooled average without you actively "buying" more shares:

• Reinvested dividends or distributions — automatically purchased units or shares are added to the pool at their value on the reinvestment date, raising your total cost.
• Stock splits and consolidations — these change the number of shares and the cost per share, but not your total ACB.
• Return of capital distributions — these reduce your ACB rather than counting as income in the year received.
• Corporate reorganizations (mergers, spin-offs) — these can require you to allocate your original ACB between the old and new securities based on relative fair market value.

Missing any of these adjustments is one of the main reasons an investor's reported ACB doesn't match what a broker's tax slip shows.

Common Mistakes on a Partial Sale

• Using the price you paid for "the shares you're selling" instead of the pooled average across all your identical shares.
• Forgetting shares held in a different account. If you hold the same stock in two non-registered accounts, CRA still expects you to pool them together for ACB purposes.
• Ignoring reinvested distributions, which understates your ACB and overstates your gain.
• Not adjusting for a stock split before calculating the per-share cost.

Brokerage-reported ACB figures on year-end statements are a useful starting point, but they aren't always complete — especially if you moved a position between institutions or reinvested distributions outside a formal reinvestment plan.

Frequently asked questions