What your cost base has really become.
Return of capital lowers your adjusted cost base every time you are paid. The number your broker showed on the day you bought is almost never the one that matters when you sell.
Why this is not what your statement says
Brokers report the book value they have on file. Many do adjust it for return of capital and some do not, and none of them can see units you transferred in from elsewhere. The obligation to get this right is yours, and the error only surfaces years later, in the year you sell.
The mistake costs money in both directions. Report the unadjusted cost base and you overpay tax on a gain that is smaller than it looks. Ignore the adjustment entirely and you underpay, which is the CRA's problem to find and yours to settle.
When the cost base hits zero
An adjusted cost base cannot go below zero. Once return of capital has repaid everything you originally paid, every further dollar is an immediate capital gain in the year you receive it — cash arrives, tax is owed, and nothing was sold.
That is not theoretical for high-payout funds. HYLD was 100% return of capital in 2025; at its current rate a position takes roughly 9 years to have its entire cost returned. What that fund costs in tax.
What this does not cover
One holding, one purchase price. Real cost base is an average across every buy, including commissions and reinvested distributions, each of which changes it — and it is tracked per holding, not per account. Doing that by hand across years of monthly payments is where people give up. The full explanation.
Or have it carried for you.
Import your trades once and the adjusted cost base updates with every distribution, every purchase and every reinvestment — per holding, per account.