Business Investment Loss (BIL)

by Tax Guy - Burlington Accountant on February 11, 2010 Print This Post Print This Post

A business investment loss (BIL) is a special kind of capital loss that happens when you sell or dispose of socks or debts of a Small Business Corporation (SBC) to a person at arms length

One-half of the BIL is called an Allowable Business Investment Loss (ABIL) and can be written off against any income. This is a little different from a standard capital loss (known as an allowable capital loss), that only permit losses to be applied against capital gains.

If you own the stocks of a SBC that is insolvent and no longer have a market value or own the debts that are considered a bad debt, you can elect to have your stocks or debt disposed of at nil value under s.50(1) to claim the ABIL. Under this provision, you are also considered to have re-acquired the stocks or debts at nil value at the end of the tax year.

Since you still retain ownership, you may be able to re-use the corporation for another purpose and recoup your investment. Of course, you will have to report and pay tax on the amount recovered.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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