Record-Keeping for Adjusted Cost Base: What the CRA Expects If You're Audited

If the CRA ever reviews your reported capital gains, it won't take your word for what you paid for an investment. The burden generally falls on you, the taxpayer, to show that your reported numbers are correct — which means ACB record keeping isn't a nice-to-have, it's the difference between a smooth review and a reassessment you can't easily fight.

Most investors only think about this after a letter arrives. By then, some records may be years old, scattered across closed brokerage accounts, or simply gone. Building good habits now avoids that scramble later.

Why the Burden Is on You

On an ordinary reassessment, it's generally the taxpayer's job to demonstrate that the CRA's adjustment is wrong — not the other way around. If you can't produce documentation supporting your claimed ACB, the CRA is entitled to use whatever information it can verify, which may not be in your favour. A CRA review of investment income can be triggered a number of ways, including data-matching against slips issued by your brokerage, unusual patterns in reported gains, or random selection — being selected doesn't mean you did anything wrong, but it does mean you need your paperwork ready.

The Records CRA Actually Wants

• [ ] Trade confirmations for every purchase and sale, showing the date, quantity, and price.
• [ ] Annual brokerage statements, especially year-end summaries.
• [ ] Tax slips (T3, T5, and any equivalent) showing distributions, and the breakdown between income, capital gains, and return of capital.
• [ ] Reinvestment plan confirmations, since these increase your ACB even without a cash transaction.
• [ ] Records of transfers between institutions, which can otherwise create a gap in your cost history.
• [ ] Documentation of corporate actions — stock splits, mergers, spin-offs — and how you allocated your original cost afterward.
• [ ] Foreign exchange records for any securities purchased or sold in a foreign currency.

Special Situations That Complicate Your Records

Some events create ACB history that isn't visible on an ordinary brokerage statement at all:

• Inherited securities. Your ACB as a beneficiary is generally based on the fair market value at the date of death, which needs to be documented independently — it won't appear on any trade confirmation.
• Gifts of securities. A gift can trigger a deemed disposition for the person giving it, and the recipient's ACB is generally the value at the time of the gift, not what the original owner paid.
• In-kind transfers into a TFSA or RRSP. These are treated as a disposition at fair market value, and the details of that valuation should be kept even though no cash changed hands.
• Positions moved between brokerages. The receiving institution doesn't always import a complete or accurate cost history, so it's worth confirming the numbers independently at the time of transfer.

How Long to Keep Your Records

CRA guidance requires taxpayers to retain supporting records for a set period tied to the relevant tax year, and that period runs differently for capital property than for routine annual filings, because the CRA needs to trace your cost history all the way back to when you first acquired the investment — even if that was many years before the sale. Rather than guessing at a specific number of years, the safest approach is to keep every purchase-related document indefinitely for as long as you still hold the investment, and to check the current CRA retention guidance before disposing of anything after a sale.

What Happens If You Can't Produce Records

Without documentation, the CRA may propose to assess your ACB at a lower figure than you believe is accurate — sometimes as low as zero — which inflates your reported gain. Reconstructing cost history after the fact is possible using old statements, fund company archives, or historical share price data, but it's slower and less reliable than having kept the originals.

Frequently asked questions