Charitable Donations: Non-Registered Asset Donations

The following provides details on donations from non-registered assets specifically.


How to enter donations from a Non-Registered Asset

If a client is considering making a charitable donation and they own a stock or mutual fund that has had large gains, it may make sense for them to gift the stock or mutual fund directly to the charity rather than selling it, paying taxes on the capital gains and donating the proceeds of the sale. By gifting the stock or mutual fund directly,  the charity is able to receive the total value of the stock/mutual fund, the donor does not realize any taxable capital gains (hence pays no tax on this) and they receive a tax receipt for the full value of the donation.

In the year of the donation, Snap will either apply the tax credit that year or carry it forward up to 5 years to claim it in the most advantageous way.  You will be able to view the donation amounts that have been carried forward each year as well as the donations that have been already claimed.  Snap will also display a comparison of the total tax based on whether or not a donation has been made. 

  1. In Scenario Setup -> Settings, please enable Charitable Donations feature and enter any unclaimed donations expiring in the next 5 years.
  1. Navigate to the client's individual Planning Page -> Financial Assets section and enter the total annual donation in the Donation column.

  • Click the $0 value in the Donations column (you will not see this column unless you enable the feature).
  • Enter the total donation for that year and it's cost in the pop-up and save it by clicking the blue checkmark icon.
  • Run Scenario to apply this donation to your projections and to recalculate the numbers on the Planning Page.
  • If you don't know the Cost of donated securities, you can leave that field blank and the software will make an assumption for you. This assumption will depend on the non-registered account asset mix and portfolio settings. Note that by default, capital gains-producing equities are donated first.
  1. Review the total of all donations from Financial Assets on the Planning Page -> Charitable Donations.

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Detailed Example

We will use a basic example to help demonstrate how donations of securities work in Snap. 

  1. We have a non-registered asset with a Value of $100,000 at the start of the projections and an adjusted cost base (ACB) of $50,000. The asset is allocated to 100% Equity at 0% Rate of Return for simplicity.  Additionally, the portfolio settings have been updated to indicate the equity portion consists of 100% capital gain producing stock with 0% turnover each year.  

  1. In this example, the client has made a $50,000 donation in the third year of projections, and we have indicated a Cost of the donation of $0.  The $100,000 account balance is now reduced to $50,000 and the Cost of the account after the donation is $50,000.   You can hover your mouse over the Value column for the non-registered asset to view the Cost after the donation was made. If the client withdraws the remaining balance of $50,000 in the following year for example for their own spending, there are no capital gains realized on this withdrawal since the Cost of the account is equal to the withdrawal amount.

  1. This donation successfully realizes all capital gains within the non-registered asset. As such, if we make a withdrawal in the next year, we will not see the increase in Taxable Income for that year that is normally attributed to the realization of capital gain.

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