Okay, now THIS I know ! You are correct boatboy.

In Canada, we must use the adjusted cost base in determining the capital gain. Your total cost of the shares is divided by the number of shares that you own, prior to a sell. Then the avg. SP of your shares is subtracted from the SP you sold at, multiply that times the number of shares you sold and that is your capital gain.

AND after the sell, your adjusted cost has now changed. Same thing when you buy more. SO, as one CCRA agent said to me, always know our adjusted cost base before you sell, to factor in your capital gains.

Now doesn't that just suck ? However, here's a bit of tax insider info. And I do not suggest that any of you do this. BUT, a CCRA agent also told me that reporting your capital gains from the market, is an honor system. Can you believe that ? The government trusts us to be honest to them. Hah ! ....anyways, I do know some people that do not report all of their sells/capital gains.

Of course, CCRA can check anything they want and if you are audited and they find thousands of dollars in unreported capital gains, you would be in some serious dung. So I strongly recommend that you report all capital gains if you are a Canadian citizen. I am unsure of the American laws on this and so I won't speculate until I research it a bit more.

Hope that helps ! (that's the first time I've said that here...)