Why is adjusted cost base” relevant?
The adjusted cost base of the units is important for two reasons. Firstly, it is used when calculating the capital gain or loss resulting upon the sale of units. Secondly, the foreign content of RRSPs and RRIFs is determined with reference to the adjusted cost base of the units. These types of plans may hold 20% of the assets in the plan in foreign securities, measured at cost. It is therefore necessary to keep track of these adjustments to the cost base to avoid incurring penalties. Now that we are approaching the end of the year, it is important to closely monitor the foreign content of your client’s registered plans. The foreign content of these plans could exceed the 20% limit as a result of a reinvested distribution from a foreign fund. For plans that are close to the 20% limit you may wish to request cash distributions. Alternatively, you may wish to purchase more Canadian investments. The comments in this Tax Tip are not intended, nor should they be relied upon, to replace speci
