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:

Actual Disposition
A share of the capital stock
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”

Deemed Disposition
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.
This can happen if there is a bad debt owing to you; and
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 [email protected] or (905) 836-8755.

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