Calculating capital gain for stocks?

[Canadian]

Hi,

I have a question on calculating capital gains for stocks. Here is an example of what I mean.

I bought 1,000 shares of company ABC for $4 per share.
Several weeks later I bought another 1,000 shares of ABC for $3 per share.
I recently sold 1,000 of the shares for $5.20.

My question is how is exactly the capital gain calculated in this case? Does the calculation use the difference between the sale price and my average buy price ($3.50) or is it calculated differently?



Thanks

[trent]

That's actually a very common question :). The answer is that you get average prices of all your purchases of this particular stock, and subtract it from the sell price, no matter how many shared you sell. In your example your average price comes to $3.50 per share, which means that when you sold 1,000 shares at $5.20 you made profit of $1.70 per share for a total profit of $1,700.

I hope this helps.

[Canadian]

Thanks Trent,

Averaging seems kind of unfair to me, especially if there was some time between the stock purchases, but if that's the way it then so be it.



Thanks again