Does a Business Loss Help With Your Tax Obligation?

Allowable Business investment loss

It is really important for you to understand what position a Allowable Business Investment Loss (ABIL) can put you in with regards to your taxes.

This is a capital loss that occurs from the disposition of the shares of a small business corporation or involves a debt of the company.   In order for the company to qualify as a small business corporation it has to be a private corporation that is Canadian controlled. Also, it has to use 90% of the assets it owns to operate a business in Canada that is active.

The entire business investment loss is not allowed, but one half of it is.   This loss if it meets the CRA criteria can be used as a deduction against any of your other sources of income applicable to that specific year.

Now when first thinking about this type of loss, it may seem that it is only something that would be pertinent or of interest to the large investor.  This is not the case as many average individuals will take their savings and invest it into real estate mortgages that is usually under the control of an entity that specializes in offering mortgages to development properties.   Many times these projects fail and the mortgages are not able to be collected.   While this doesn’t help the small time investor to get their money back at least there may be a chance to offset the loss against other income that individual may have generated.   The Allowable Business Investment Loss is not just restricted to individuals, but is also available to Corporations who fit the criteria.

Whenever any type of investment is being made it is critically important to know what the potential tax implications can be.   For this reason it is wise to use the services of an accountant who knows what the tax laws are concerning the specific investment.   Sometime a little knowledge can be dangerous when it comes to tax rulings, as they must be fully understood in their entirety and this is what a good accountant is capable of.

A good example of this is not realizing that an ABIL may not be able to be deducted in the year that it occurs, but it could possibly be deemed as a non-capital loss.   This means it could be carried back to the three previous tax years, or perhaps forward during the following ten years, and maybe even indefinitely if it is going to be used against a capital gains after this time.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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