Example: Selling Part of a Position
This walkthrough shows what happens when you sell some (but not all) of a security holding. You'll see how proceeds are split and how remaining balances are calculated.
The Scenario
You hold a position in VFV that you built over time with multiple purchases:
| Attribute | Value |
|---|---|
| Symbol | VFV |
| Units | 400 |
| Total Cost Base | $10,000 |
| Borrowed Cost Base | $7,000 (70%) |
| Personal Cost Base | $3,000 (30%) |
The current market value is $12,000 ($30 per unit). You want to sell half your position—200 units—to rebalance your portfolio.
Making the Sale
On April 10, you sell 200 units at $30 per unit, with a $5 trading fee.
Event: Investment Sale
- Date: April 10
- Symbol: VFV
- Units: 200
- Price per unit: $30.00
- Fee: $5.00
- Total proceeds: $5,995 (200 × $30 - $5)
The Calculation
Step 1: Determine cost base removed
You're selling half your position (200 of 400 units), so you remove half your cost base:
- Cost base removed: $10,000 × (200/400) = $5,000
- Borrowed cost removed: $7,000 × (200/400) = $3,500
- Personal cost removed: $3,000 × (200/400) = $1,500
Step 2: Calculate gain or loss
- Proceeds: $5,995
- Cost removed: $5,000
- Gain: $995
Step 3: Allocate proceeds
The proceeds are split based on the position's borrowed/personal ratio, with gains going to personal:
- Cost recovery: $5,000 (split 70/30 like the original funding)
- Borrowed portion: $3,500
- Personal portion: $1,500
- Gain: $995 (all personal—gains are income)
Final proceeds allocation:
- To borrowed cash: $3,500
- To personal cash: $2,495 ($1,500 + $995)
Balance Changes
Credit Account:
| Balance | Before | Change | After |
|---|---|---|---|
| Invested Principal | $7,000 | -$3,500 | $3,500 |
| Uninvested Principal | $0 | +$3,500 | $3,500 |
Brokerage Cash:
| Balance | Before | Change | After |
|---|---|---|---|
| Borrowed Cash | $0 | +$3,500 | $3,500 |
| Personal Cash | $500 | +$2,495 | $2,995 |
| Total Cash | $500 | +$5,995 | $6,495 |
VFV Holding:
| Attribute | Before | After |
|---|---|---|
| Units | 400 | 200 |
| Total Cost | $10,000 | $5,000 |
| Borrowed Cost | $7,000 | $3,500 |
| Personal Cost | $3,000 | $1,500 |
| Borrowed % | 70% | 70% |
Key Observations
1. The borrowed percentage stays the same
Your remaining 200 units still have a 70/30 borrowed/personal split. Selling proportionally doesn't change the ratio.
2. Invested principal decreased by the borrowed cost sold
$3,500 of your invested principal is now uninvested—it returned as borrowed cash when you sold.
3. Gains went entirely to personal cash
The $995 gain is income. It doesn't increase your borrowed cash or affect deductible interest calculations.
4. You now have borrowed cash to manage
The $3,500 borrowed cash can be:
- Reinvested in new securities (maintains invested principal)
- Left as cash (temporarily uninvested)
- Withdrawn for personal use (becomes non-deductible)
What If You Sold at a Loss?
Let's replay the scenario, but the market dropped. You sell 200 units at $22 per unit.
Revised Sale:
- Units: 200
- Price: $22.00
- Fee: $5.00
- Proceeds: $4,395 (200 × $22 - $5)
Calculation:
- Cost removed: $5,000
- Loss: $605 ($4,395 - $5,000)
How the loss affects allocation:
When you sell at a loss, proceeds are less than cost. The loss is shared proportionally between borrowed and personal recovery:
- Proceeds: $4,395
- Borrowed portion (70%): $3,076.50
- Personal portion (30%): $1,318.50
What happened to the "lost" borrowed capital?
Your borrowed cost removed was $3,500, but you only recovered $3,076.50 as borrowed cash. The difference ($423.50) was "lost" to the sale—but the debt remains.
This is important: you still owe your full credit balance. The loss reduced what you recovered, not what you owe. However, the $423.50 that was borrowed, invested, and lost remains deductible debt. The fact that the investment lost value doesn't change the purpose of the original borrowing.
Balance Changes (Loss Scenario):
| Balance | Before | Change | After |
|---|---|---|---|
| Invested Principal | $7,000 | -$3,500 | $3,500 |
| Uninvested Principal | $0 | +$3,076.50 | $3,076.50 |
The full borrowed cost ($3,500) is removed from invested principal, but only the recovered amount ($3,076.50) goes to uninvested. The $423.50 difference represents borrowed capital that was lost in the investment—it's no longer traceable to either invested or uninvested, but the debt persists.
Selling Your Entire Position
If you sell all 400 units instead of 200, the math scales up proportionally:
- All cost base is removed
- All borrowed cost becomes borrowed cash (or less if sold at a loss)
- The holding is eliminated
- Your remaining position is zero
The principles are identical—just applied to 100% of the position instead of 50%.
Multiple Lots at Different Ratios
What if you bought VFV in multiple transactions with different borrowed percentages?
Example purchase history:
- Lot 1: 200 units, $4,000 cost, 100% borrowed ($4,000)
- Lot 2: 200 units, $6,000 cost, 50% borrowed ($3,000)
Combined position:
- 400 units, $10,000 cost, $7,000 borrowed (70%)
When you sell 200 units, you're selling from the combined position, not a specific lot. Canada's adjusted cost base (ACB) rules require averaging. The app treats your entire position as having the blended 70% borrowed ratio.
This differs from US tax rules (which allow specific lot identification). In Canada, securities are pooled for ACB purposes, and this app follows that approach for borrowed allocation too.
Key Takeaways
- Partial sales remove proportional cost basis. Selling half your units removes half your cost (and half your borrowed cost).
- The borrowed percentage of remaining shares stays the same. Proportional sales don't change the ratio.
- Gains go to personal cash. They're income, not return of borrowed capital.
- Losses reduce what you recover, not what you owe. Borrowed capital lost in a bad investment is still deductible debt.
- Consider what to do with returned borrowed cash. Reinvesting maintains your invested principal; withdrawing converts it to personal-use debt.