Cost Basis: The key to calculating capital gains in any jurisdiction is Cost Basis. Without this information, any capital gains tax calculation would be inaccurate as the security could have changed since its purchase. Our Cost Basis service has been designed to track both a security's cost basis, its evolution, and all its descendants cost basis & evolution up to the current date.
Many events can cause changes to the original holding (e.g. de-mergers, distributions), and therefore cause your original booking to be diversified into many other holdings. Our Cost Basis service tracks all of these changes and their cost that affect your cost basis and the number of units you hold. We calculate and disseminate allocation factors for all events that affect or might affect the cost basis of a parcel of shares — irrespective of your tax methodology. It is up to you to decide which tax methodology to apply and calculate accordingly.
Events covered by our Cost Basis service:
Return of Capital
Security Evolution: Security evolution is where you start with a security, but then end up with multiple securities many years later. Many events, over time, can cause changes to the original holding. For example, de-mergers and distributions will cause your original holding to be diversified into many other holdings.
Additionally, different tax treatments to different events (e.g. DRIP - Dividend Reinvestment Plan) can cause new holdings, for the same security, to have different cost basis to the original holding. Tracking all these changes and their cost basis would be difficult without a security evolution service. Events that aid in the tracking of security evolution but have little effect on cost basis include code-changes, share-swaps, etc.
Here’s an example of how our Cost Basis service can help:
1000 ABC shares were bought for $1 per share, making the cost basis $1000 on the day of purchase.
Sometime later ABC did a distribution (spin-off) of XYZ to its shareholders and the allocations were computed to be 60% (ABC) and 40% (XYZ).
After the distribution the cost basis of ABC was $600 (60% of $1000) and XYZ was $400 (40% of $1000).
Therefore when XYZ was subsequently sold for $700 the amount liable for CGT was $300 ($700 - $400).
Our Cost Basis service would disseminate the above allocations (ABC: 60% and XYZ: 40%) in two records, one for ABC and the other for XYZ. Each record identifies both the original security as ABC and the distributed (spun-off) security as ABC and XYZ respectively. For example:
By doing the above you are able to clearly identify which record represents the stock (original security) and which record represents the issue (new security or cash). Cash is included as a separate record because often the cash component of an issue is entitled to its portion of the stock’s (original security) cost basis. For example, where a de-merger includes both a script component and a cash component, or where a capital return or dividend is done by way of a script issue, immediately redeemable for cash.
Tax Status: Tax status specifies how much of the issue’s value is taxed in the financial year of receipt. Any portion of the issue’s value not taxed immediately simply reduces the cost basis and hence defers tax until sold or converted to cash.
Taxable: The full issue value is taxed in the year of receipt. The issue (cash or script) value is immediately taxable and is considered part of your income for that financial year. No cost basis is transferred from stock to issue. For example, dividends are normally considered as income and the full dividend amount is taxed in the financial year they are received.
Tax-free: None of the issue value is taxed unless sold or converted to cash. Cost basis is transferred from original stock to the issue be it script or cash.
Tax-none: Special case where cash is received and is used to reduce cost basis of original stock (e.g. capital return).
Our Cost Basis service does not specify the tax status of an event. It is up to you to determine that and handle the cost basis appropriately. For example, a capital return is normally tax-none. However, in certain circumstances, it can be tax-free. It is up to you to decide which and handle accordingly.
Valuation: We use the security’s end-of-day closing price to calculate allocation factors. However, many countries, including the USA and Great Britain, also accepts (High + Low)/2 and the open and VWAP, etc. In fact there are many values you can use to calculate allocations, each generating a slightly different factor. Generally governments do not have a problem with this as long as you are consistent.
Coverage: The Cost Basis service covers listed equities on 180+ exchanges worldwide. We do not cover unlisted securities. So for example, if a stock does a distribution of a security that is never listed, then allocations will not be generated because the value of the unlisted security cannot be determined.
History: Varies by exchange, as far back as January 2000.
Updates: Data is updated daily.
Delivery: Files are delivered as delimited text files via download or API. The daily files contain the most recent cost basis figures and number of unit figures on a per exchange basis.