Now lets assume they pay same dividend on same unit value in 1991, 1992, 1993 and then you sell your shares in XYZ mutual in 1994 and receive net proceeds of $14,000. Most people I have found would report a capital gain of $4,000 on their tax return and forget that they already paid tax on four annual dividends. The capital gain is actually $1,600 ($14,000 - $10,000 + 4 x $600), less than half of what is often reported. The good news is that if this has happened to you, you can apply to have an adjustment for at least last three years of tax returns and sometimes further back than that.

As you may sell a portion of your shares instead of entire position, it is necessary to keep track of these matters on a price per share basis, rather than total investment. By adding dividend per share to previous cost per share, you now have new cost per share for future redemptions. This calculation is especially helpful if you are taking a regular monthly income from a mutual fund-often referred to as systematic withdrawal plans. As there are often twelve redemptions per year, a simple record is necessary to come up with taxable portion for tax time.

If you don not keep track of your cost per share you will be paying more tax than necessary. If you have other losses to offset your gains, you will be using up your losses needlessly. All of these are forms of double taxation, which result from not keeping track of reinvested dividends. If you want a form for keeping track of your cost base there is a free Form for tracking ACB, which you can download, form our web site at www.money-software.com

Copyright 2004 – www.money-software.com

Ten years ago there was no Financial Planning industry as it emerged because average investor required someone to guide them through complexity of tax regulations and investment choices. I think growth of financial planning industry is due in no small part to growth in service industries. As everything in our daily lives becomes so specialized we need to turn ever more to people who specialize in areas we need help in. Today association is recognized as national organization for regulation and development of financial planning in Canada. It is possible to phone in any major city in Canada to Inquire if someone is a regular member, an associate member in good standing, or is even a member at all. In British Columbia Association is called British Columbia Association of Financial Planners. The phone number is (604) 684-8843.

Last month I was honored to be elected President of British Columbia Association of Financial Planners. Bring on that disbarred lawyer!

Copyright 2004 – www.money-software.com