How to Enable the Adjusted Cost Base (ACB) Setting
At this time, capital losses are disregarded in Snap. You cannot model capital losses even for a single asset. You also cannot offset capital losses against capital gains from other assets or real assets in the same year. And you cannot carry capital losses forward or back to a different year. As a workaround, you can increase the adjusted cost basis of a non-registered asset, use tax deductions, tax credits, or an offsetting new income that represents the tax deduction that is expected each year.
Go to Scenario Setup -> Settings -> Advanced.
Check the checkbox for Enable Adjusted Cost Base (ACB) for this scenario.
If you would like to enable the ACB data entry for all new scenarios, please check that box as well.
Under Scenario Setup -> Assets, you will see a new column titled Cost in the Capital Assets table. You can update the Cost for each non-registered asset by clicking the current value and editing it.
You are able to enter the ACB for an account that consists of all three asset classes. However, the cash and fixed income portions of the non-registered assets generate interest income only in the projections. Equities are the only asset class that can generate capital gains in Snap. The ACB entered here will be taken into consideration for the capital gains calculations, even if there are cash and fixed income portions of the account.
You can access the Portfolio Settings (by selecting Scenario Setup -> Settings -> Portfolio) and further specify the Equity Return Allocation between capital gains, and foreign and Canadian dividend-producing stocks.
Let's use a simple example to illustrate. We have a non-registered account with a $100,000 starting balance and an ACB of $20,000. The asset is split into 0% cash, 80% fixed income, and 20% equity.
If we withdraw $100,000 in the first year, we will realise $40,000 of taxable Capital Gains. (The Total Capital Gain = $100,000 - $20,000 = $80,000, and the taxable capital gain is half of that amount.)
Note: In the software, in order to allow the entry of the Cost, you must have allocated a percentage to equities, even if it is a very small percentage.