You invested your hard earned money in a promising business. But sometimes, what looked like a good capital investment turns out to be financially insolvent. If this is the case, Canada Revenue Agency (CRA) may allow you a tax deduction, namely Allowable Business Investment Loss (ABIL).
Some common scenarios of investments eligible for Allowable Business Investment Loss (ABIL) are investments in shares, loans, guarantees or mortgages to a privately held Canadian company. The company you invested in, or lent money to, must be bankrupt or insolvent at the end of the year for which the claim is made.
With the high marginal personal tax rates across Canada, the recovery may be worth as much as 25% of the original loan or investment in shares. This is because the tax deduction is for 50% of the actual loss incurred - the "allowable" portion of the Business Investment Loss. The recovery varies, depending on your personal tax rates, province of residence and many other factors. Even if you do not have enough income in the year the Allowable Business Investment Loss (ABIL) claim was made, the loss can be carried back three years and forward ten years. Assuming that your income was high enough for the past few years, you may in fact receive the full benefit of the tax loss deduction the same year the Allowable Business Investment Loss (ABIL) claim was made and the past tax returns were requested for adjustment. The higher your personal tax rates are, the higher your refund will be.
For a free professional evaluation of your Allowable Business Investment Loss (ABIL) claim call businessloss.ca at 1-855 -TAX-ABIL (855-829-2245) or complete our confidential Contact form.