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

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