Unfortunately, if you are down with a dose of procrastination at the wrong time, income can decline and taxes increase. Attention to business now, on the other hand, can lead to money saved and a more relaxed state of mind.

Putting off a complex matter such as calculating capital gains and losses can create uncertainty about the year's income tax liability for both individuals and businesses. Rather than waiting until the end of the year to gather all the information, good business practice suggests recording the data on a spreadsheet as you go. This way, dates and prices of acquisitions and dispositions are always up to date and easy to consult.

Your Portfolio Spreadsheet

Headings should include:

1. Date of the transaction
2. Name of corporation whose securities are the subject of the transaction
3. Buy
4. Sell
5. Type of instrument purchased or sold
6. Quantities of shares or units; dollar amounts of debt instruments
7. Share or unit cost of the transactions in original currency
8. Currency type
9. Total cost in the original currency
10. Conversion rate at the date of transaction
11. Cost of the transaction in Canadian dollars
12. Brokerage, interest or other costs associated with the transaction
13. Portfolio management costs, if any
14. Total transaction costs in Canadian dollars
15. Gain or Loss
16. A running total of the dividends or interest received through the year
17. Name of the broker who did the trade

Make the initial entries when the investment is purchased. Calculate total purchase costs in the original currency, then convert the purchase costs, brokerage fees and other costs to Canadian dollars. When it is sold, record the date of the sale in the Sell column as well as the conversion rate. This will provide the total proceeds for the transaction exclusive of brokerage fees, interest, etc. Once these two figures have been established, subtract the Buy total from the Sell total to record the gain or loss.

If only part of the holding is sold, you must make a separate entry for the partial sale and a separate gain or loss calculation. If only 50 shares of an original 120-shares purchase are sold, for example, ensure that the spreadsheet reflects the original purchase cost to calculate the gain or loss for that transaction. As well, make sure that the 70 unsold shares are left at original cost since this information will be needed when these shares are sold. Always reconcile the specific shares purchased and sold to ensure that the portfolio reflects the balance of costs for investments currently owned.

Quarterly Statements

Most brokerage houses send a quarterly statement reporting the transactions of the period. These statements should be carefully checked against the trade confirmation slips and the spreadsheet to ensure all purchases and sales are correctly recorded. If any portfolio fees are incurred, record them in the appropriate column and check to see they agree with the quarterly statement.

Match and Attach

Your broker will send confirmation slips reporting the gross amount of the transactions, commissions and exchange rates. Because these slips report each transaction, they should be attached to a printout of the spreadsheet to support the summarized data recorded on the spreadsheet.

Contact Information

Even though you are probably using only one or two brokers for all your transactions, keep the contact information at the top of the spreadsheet. In the final column of the spreadsheet, note the name of the broker for each transaction.

Manage Gains and Losses

Managing and updating the information on a regular basis will enable you to:

• Track gains and losses accurately
• Know how much dividend and interest income you have received
• Evaluate the performance of the portfolio manager
• Make trading decisions
• Plan long-term investment strategies

Third Quarter Review

The up-to-date record provided by the spreadsheet will put an end to unpleasant surprises at the end of the year that could adversely affect profits and your income tax liability. A review at the end of the third quarter and discussions at that time with your chartered accountant will enable you to plan portfolio adjustments for the fourth quarter to maximize profits and minimize losses and income taxes. If action is needed, there is still plenty of time to contact your broker and discuss your revised investment strategy.

Reduce Your Costs

Managing and maintaining current investment information provides other measurable benefits as well. For one, your chartered accountant will be able to review the current data on the spreadsheet rather than have to rebuild your activity from a “shoe box” full of confirmation slips and monthly statements. This eliminates those frantic and costly calls asking for documentation on original costs, dates of purchase and exchange rates.

In the event that CRA audits your returns, the summary pages, confirmation slips and monthly statements will substantiate your claims. These documents not only reduce the cost in time and money of having to rebuild the tax return data, but also shorten the time required to satisfy a CRA agent. Keep the summaries and supporting documentation for at least 10 years after original investments have been sold in case of an audit. Managing a portfolio is time consuming but procrastination will steal even more precious time. And who has time for that?