Tax Services

Business Investment Loss (ABIL)

What is an Allowable Business Investment Loss (ABIL)?

A business investment loss is a capital loss from disposition of shares or debt of a Small Business Corporation (Canadian controlled private corporation that uses 90% or more of its assets in operating an active business in Canada). One half of the business investment loss is an Allowable Business Investment Loss (ABIL).

Why is this important? Because Allowable Business Investment Losses can be deducted against all sources of income for the year.

Unclaimed Allowable Business Losses (ABIL)

If an Allowable Business Investment Loss (ABIL) cannot be deducted in the year it arises, it is treated as a non-capital loss that can be carried back three years and forward ten years against taxable income from such year. If unused after ten years, an Allowable Business Investment Loss (ABIL) becomes a capital loss that can be carried forward indefinitely and claimed against capital gains only.

Allowable Business Investment Loss (ABIL)- common scenarios

Investment in shares or loans to a Small Business Corporation

There are numerous cases when taxpayers invested their lifetime savings in real estate mortgages or similar projects. The projects are usually run under a corporation that will mortgage (and sometime second mortgage) properties under development in order to obtain the necessary financing. If the projects are unsuccessful and the loans are uncollectible, the taxpayer may have a valid Allowable Business Investment Loss (ABIL) claim. A corporation can also claim an Allowable Business Investment Loss (ABIL).

Shareholder loan of a corporation that becomes financially insolvent

A corporation doesn't need to file for bankruptcy to be eligible for an Allowable Business Investment Loss (ABIL) claim. However, the shareholder must be able to prove the loan advanced to the corporation is not recoverable.

Liabilities for payroll withholdings and GST on behalf of corporation

Sometimes directors of a corporation are found liable by Canada Revenue Agency (CRA) for GST or payroll withholdings. If the directors paid the amount but were not reimbursed by the corporation, this may be eligible for an Allowable Business Investment Loss claim (ABIL).

Direct investment in another person's Small Business

If an investment was made either through acquiring shares or debt of the financed corporation and the business failed and cannot repay the loan, the taxpayer may be eligible to claim an Allowable Business Investment Loss (ABIL).

Loan guarantees on behalf of a Small Business

The tax laws deem amounts honored under the guarantee as amounts owing by a Small Business Corporation to the taxpayer. This is usually the case when the corporation received a loan that was personally guaranteed by the taxpayer, and the creditors executed the guarantee due to the inability of the corporation to repay the loan. The amount of unpaid guarantees may be eligible as an Allowable Business Investment Loss (ABIL).

Your trusted Chartered Accountant provides a full range of tax services regarding Allowable Business Loss (ABIL) claims.

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Allowable Business Investment Loss (ABIL) Claims
308, 1228 Kensington Rd. NW Calgary, AB T2N 3P7

Toll free: 1-855_-TAX-ABIL
Tel: 403-351-0996
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