DRIP Plan: How Do I Calculate the ACB?

Can you please walk me through how I would calculate the adjusted cost base and capital gain in the following scenario...

My husband was an employee of a Canadian subsidiary company and purchased shares of its U.S. parent company via their employee stock purchase plan, at a discount to market price. A taxable benefit for this discount was added to his employment income. He also participated in the dividend reinvestment plan and the dividends were used to purchase additional shares, at a discount. Administration fees were deducted from his account every year.
 
After he left his employer he continued in the dividend reinvestment plan, purchasing additional shares at a discount and paying the annual admin fee. Every year on his income tax return he reports the dividend income and U.S. withholding taxes that the company reports to him. None of the account administration fees have ever been declared on his taxes. He is in a capital gain position and may plan to sell his shares in the near future.

Response

You have shares acquired under two different methods and the ACB of the shares currently held is the sum of the ACBs of the two groups – but the ACB is calculated differently for each group.

Shares acquired under an employee stock option. The ACB of the shares is the cost to the employee (exercise price) plus the taxable benefit included in their income as a result of the exercise of the shares. (On the tax return a stock option benefits deduction will have been received at the time of the benefit.) 

Shares acquired under a DRIP program. Under a DRIP program the dividends are not paid out but are used to purchase stock. (See T5 or US info slip.) The ACB of the shares acquired under the DRIP program is the amount of the dividends that were reported in income but not received because shares were received instead.

Fees paid. If the admin fees reduced the number of shares that were acquired under the DRIP program, they are already built into the ACB. Any fees paid on disposition would be shown on Schedule 3. If fees were paid for management or safe custody and assuming that the administrative fees were related to the shares, they may qualify as carrying charges, deductible on each tax return for the year in which the fees were paid. You can adjust each of those returns (back to 2003 if you file the adjustment request before the end of 2013) to claim those carrying charges and you’ll get a refund of taxes for each year.