How do I fix a T5008 Warning

Shelley9 · ‎June 02, 2020

This is the warning I get ... "Capital gain (or loss) will be reported in Schedule 3 or investment income will be reported in Schedule 4 from T5008(s) entered. The amount(s) reported in box 20 may or may not reflect the investor's ACB for the purpose of determining the gain or loss from the deposition of the security. The investor should be aware that he or she may have to make adjustments to the amount indicated in box 20 at the time of determining and reporting his or her gain or loss from the disposition."

jparsons · ‎June 02, 2020

This is a normal warning. I get them with every T5008 entry made, even if they are via AFR. What you may need to do is verify with your client that the amount in box 20, which is the ACB of the investment, is the correct amount. I've had T5008 slips with no entry in that box and even one with a totally fictitious entry courtesy of National Bank Financial. This probably isn't relevant to your situation, but the T5008 from them was for an estate of a client who died in 2016 and the ACB was way higher than my client had previously given me for other sales of the same stock holding. The National Bank representative claimed that when the bank didn't know what the actual cost was when they took on a new investment client transferring from another institution, they just entered the FMV of the stock on the date of transfer. That is totally wrong and I've been debating reporting them to IROC.

Long story short, verify the ACB with your client and adjust the T5008 if necessary. Alternatively, you can completely ignore the T5008 and just enter the details on the Capital Gains Entry worksheet (S3Details in the slips module). Come to think of it, I'm working on a file right now which has a duplicated T5008. One T5008 was issued by Templeton (correct) and the second one from National Bank included that Templeton sale in addition to other stock sales. If I wasn't paying attention, my client would be paying tax twice for the same sale.

Shelley9 · ‎June 02, 2020

Thank you, client & I are still confused, client was told they wouldn't be taxed

jparsons · ‎June 02, 2020

If the ACB is higher than the sale of the investment, there will be a capital loss. It should still be reported as capital losses can be carried forward indefinitely.

Shelley9 · ‎June 02, 2020

Box 21 is higher than Box 20 therefore they are gains, correct? How does the client make adjustments to the amount indicated in box 20

jparsons · ‎June 02, 2020

Yes, they have a capital gain. It will now be a matter of finding out why their broker said they wouldn't be taxed. Maybe the records in his office indicate a different ACB than what is in box 20. Maybe there are selling expenses which can be added on the line for "Outlays and expenses". You can over-write what is in box 20 if there is different information, but this needs to be backed up with proper records. Either the client kept accurate records or they'll have to visit their investment advisor and get correct amounts.

Shelley9 · ‎June 02, 2020

Thank you ... these T5008 are sure causing headaches ;)

jparsons · ‎June 02, 2020

You're welcome. And yes, I agree with you about those T5008s

fehrt99 · ‎January 20, 2021

Thus far I just ignore theT5008's unless the client does not have records at all. We try to verify ACB rather than trusting financial institutions' numbers.

cuneytu1 · ‎March 07, 2023

I have a nonregistered account at RBC with a couple of mutual funds for the last two years and about 20 purchases. The T5008s I get seem to have wrong ACB. I created an excel sheet with my transactions and statements but I am not sure if I am calculating it right. This time around the impact is about 200 CAD but I would like to learn if I am doing it right and also what to do to correct such T5008s. Also I can see a T3 in the bank site but not at CRA my account. I guess I have to declare it anyway.

dlarryhancock · ‎March 07, 2023

The T5008 warning is justified and is there to make you think.

For most taxpayers the T5008 information will be accurate.

But you have to understand how the ACB of an investment is calculated. If the taxpayer owns the same investment at more than one broker then the ACB provided on the T5008 is guaranteed to be WRONG if the taxpayer disposed of only part of their holdings, because the ACB is to be calculated based on the average cost of ALL holdings of that particular investment.

For years, brokers were reluctant to provide a cost base on the T5008 for exactly this reason. They could not guarantee that the amount was correct because they did not have full knowledge of a client's investments. They couldn't. And they did not want to be sued if the taxpayer later told them they'd relied on incorrect information provided by the broker.

At some point, this changed and most brokers started providing the ACBs.

But you can ignore the T5008 forms IF you have more accurate information.

The best way to get that information is to ask the tax payer to obtain a Realized gain/loss report. If they use a Wealth Manager, then this will automatically be part of the T5 package that the broker provides, along with a management fee report and a foreign holdings report. If they have a self-directed account, there is usually a report that they can generate themselves.

If they held investments at only one broker, then those reports should be accurate. If they held investments at more than one broker then you will have to discuss with your client as to whether the holdings at each broker were unique. If not, then you may have to do further analysis.

And it is possible that the ACBs provided by the broker are NOT correct. You should ask the taxpayer whether the investments were acquired in the broker account (in which case the ACB is most likely correct) or if the investments were transferred in from other holdings. If they were transferred in, then you have to satisfy yourself as to whether the broker attributed the correct ACB to the investment. There are many factors that might affect that value.

When it comes to capital gains and losses, there is a LOT that should be considered in order to provide accurate information on the tax return. It is appropriate for the software to kick up a warning to remind you to consider whether the ACB is correct.

Larry Hancock