In the situation where the gift was primarily a donation, but the donor did receive something in exchange as well, the value of the item the donor was given is known as the Donor advantage.

Some examples of a donor advantage:

• A book is given to the donor in appreciation for a donation
  
• The donor attended a fundraising banquet without paying separately for the value of the meal
  
• Green fees were included in the amount the donor paid to participate in a fundraising golf tournament
  

The examples above all involve the donor receiving benefits in return for the gift.  In such cases the general policy of the Canada Revenue Agency (CRA) is that the fair market value of the donor advantage is to be deducted from the total amount of the gift in issuing a tax deductible receipt.

As a related point, when you are setting up the accounts in your G/L accounts look-up table, there is a field to indicate whether revenue coming into a particular account is normally deductible (eligible for an “official receipt for income tax purposes”) or not. The setting you choose here will determine whether the Charitable Gift? field on the donation entry screen will default to Yes or No.  For example, you may need to set up a G/L account for purchases, and these of course would not be eligible for official receipts. Having your G/L accounts set up correctly in this way can help you avoid mistakes in this area.

Entering a donation with an advantage → Charitable Gift? YES

Sometimes, as mentioned earlier, a donation may result in a donor advantage. The fair market value of the donor advantage should be entered in the “Donor Advantage” field. If the donor advantage is a food item, then “Food Item” should be chosen from the drop-down menu, for reasons to be explained shortly.

Suppose a donor buys a ticket costing $100 for a fundraising dinner, and the fair market value of the meal is determined to be $40. This means that only $60 of the donor’s donation is eligible to be a tax deductible gift. This portion of the gift is known as the “eligible amount”.  The other portion, $40, is the advantage, essentially the non-deductible portion of the gift.  The correct way to record this donation is to enter $100 in the donation amount field, answer YES to the charitable gift type, and enter $40 in the Donor advantage field.

The principle is simple enough, but there are some exceptions you need to be aware of. CRA has devised what it calls the de minimis rule, which works as follows:

In the case where the donor advantage is 10% or less of the total donation (and where the advantage does not exceed $75), the advantage is ruled to be a token amount, and the entire donation is considered eligible.  Thus, a $100 donation in return for which the donor receives a book with a fair market value of $8 would result in a receipt with an eligible amount of the full $100.  If the value of the book, however, were $12, the 10% threshold would have been exceeded and the eligible amount would be only $88.  On the other end of the scale, the rule specifies that if the donor advantage is more than 80% of the total gift, it is to be considered a purchase, not a donation at all, and none of the donation is eligible for an official receipt.

BUT – If the donor advantage is a food item, the 10% exception does not apply at all.  Thus, with the $100 donation of our earlier example, if instead of an $8 book the donor were to receive a $6 hamburger, the eligible amount would be only $94.

The good news here is that, as long as you enter the amounts correctly, the Silent Partner will automatically calculate the eligible amount and produce the receipt accordingly.  So you don’t need to worry about understanding or remembering the de minimis rule; your job is simply to make sure that the amounts are entered correctly.

When there is an advantage to a donation, the CRA calls this “split receipting”.  They require the separate display of the following fields on a receipt:

• the total amount of the donation received
  
• the advantage amount (non-deductible portion)
  
• the eligible amount of the gift (tax deductible portion)
  

The Silent Partner will automatically handle this.