Ask Fred — Answers

Topic: Capital Gains

I have read your information page about capital gains, but I need some clarification on how the value of the stock is calculated. My husband will retire in July 08 from CP Rail. He has purchased stock by way of the company stock purchase program on a bi-weekly basis for a few years. When he first signed up for the program, the stock was work approxmately $ 30.00 per share. It is now hovering at near $ 70.00. In January 09, he wants to sell some of that stock and pay down our mortage. How will the capital gains be calculated if the purchase price of the stock varied at each transaction. Can you specify that you wish to sell your most expensive stock first.

Answer:

When reporting capital gains on the sale of his CP stock, bought through his employee stock purchase plan, your husband will have to establish the average cost of his shares. Hopefully, he has a record of each purchase in order to do so. When selling shares, his cost of the shares sold will be the average cost times the number of shares being sold. He would then apply the cost against the proceeds of the shares sold in order to determine his capital gain.

You cannot specify specific purchases in establishing the shares being sold. It is a blend of all shares purchased and establishing the average cost of shares purchased through his plan.