ALLOWABLE BUSINESS INVESTMENT LOSS (ABIL)

An ABIL is a capital loss with one special tax treatment. It is 50% of business investment loss. An ABIL is deductible at all sources of income and if they are unused during a tax year than it can be carried forward 10 years and back 3 years.

All ABIL that are not used within the 10 years will be treated as net capital losses and carried forward. This will be used as a deductible against capital gains.

The 50% of business investment loss can be incurred from the following:

  1. Actual Disposition
  2. A share of the capital stock
  3. Debt in a CCPC (Canadian Controlled Private Corporation), which is a private corporation not controlled by non-resident or public corporation (or both combined)

The loss occurs when there is a capital loss from a disposition to a party of person not related to you and who does not share common interests. This is known as “An Arm’s Length Person”

  1. Deemed Disposition
  2. The taxpayer has disposed of a share or debt at the end of the tax year for NIL and then reacquired it immediately for NIL.
  3. This can happen if there is a bad debt owing to you; and
  4. A share from a corporation went bankrupt or insolvent

This is general comment, and you should contact Tax Partners for any questions by sending an email to info@taxpartners.ca or (905) 836-8755.

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