Business Investment Loss (BIL)
Business Investment Loss (BIL)
Business Investment Loss (BIL) = capital loss on the disposal of shares or debt instruments of a small business corporation.
What is a small business corporation?
- A small business corporation is a Canadian Controlled Private Corporation (CCPC) of which all or substantially all (≥ 90%) of the fair market value of its assets are
- used in an active business carried on primarily (>50%) in Canada; or
- invested in shares or debt of a connected small business corporation
- connected means ownership of > 10% of the voting shares
- Assets not used in an active business include:
- Marketable securities
- Vacant land
- Cash not being used in active business (excessive cash beyond what is needed to run operations)
Allowable Business Investment Loss (ABIL)
ABIL = 50% * Business Investment Loss (BIL)
Special Rules for ABILs
- ABIL’s for the current year can be deducted against any source of income (business, property, employment and capital gains)
- Unused ABIL’s become part of the non-capital loss carryover balance; as a result, it can be carried back 3 years and carried forward 10 years as a division C deduction against any source of income
- If at the end of 10 years, the ABIL carried forward as part of the Non-capital losses remains unused; it then becomes a component of net-capital losses and carried forward indefinitely as a division C deduction against only taxable capital gains