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Business sold tax issues


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Hello, 

One of my clients sold a business with $15,000 business investment loss in 2020, he will have 50% of $15,000 as allowable business investment loss ($7,500), Can he use the $7,500 to deduct his personal taxable income in 2023? or he has to use it to deduct  taxable income that within the business? please advise. 

 

Thanks 

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Hello Melee,

ABIL (Allowable Business Investment Loss)
As a rule, you can deduct a business investment loss if you incurred losses in the taxation year on investments (shares or debt securities) in a Canadian-controlled Small Business Corporation Shares (not listed on a stock exchange).
You can claim this loss on lines 21700 and 21699 of the federal return, and for Quebec residents on lines 233 and 234 of the Quebec return.
The program will generate the federal ABIL schedule, as well as form TP-232.1, Calculation of ABIL, for Quebec.

For more information, consult the following sites:
For the CRA:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-217-228-business-investment-loss.html
For Revenu Québec:
https://www.revenuquebec.ca/en/citizens/income-tax-return/completing-your-income-tax-return/completing-your-income-tax-return/line-by-line-help/201-to-260-net-income/line-234/

To report this loss, please follow these steps:
1. On the "Left-side menu on the Interview tab", select "Interview setup".
2. On the right-hand side of the screen, go to "Investment income and expenses" group, check the box for "Capital gains (or losses) and capital gain history".
3. Return to the "Left-side menu on the Interview tab" and select "Capital gains (or losses) & ABIL".
4. On the page generated on the right, click on the plus sign "+" icon to the right of the line "Current year allowable business investment loss (ABIL)".
5. On the page that appears, provide the pertinent information.
6. You must enter the "Date of disposition" and "Proceeds of disposition".
7. If the amount is from debt securities go to line "Amount of small business loan eligible for the ABIL deduction" and in the field to your right, choose one of the two options and enter the amount.
The program will calculate the loss and carry over the amounts to the relevant lines of the returns.
 

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