If you’re reporting a business investment loss this year, you might be able to use it to reduce your taxable income. You can claim a deduction for your loss if it was the result of selling shares in a small business corporation (whether the sale actually took place or if the shares were just considered to be sold) or from a debt a small business corporation owes you.
Under certain circumstances, you might also have a business loss if you are deemed to have disposed of, for zero proceeds, a debt or a share of a small business corporation. Refer to the Canada Revenue Agency (CRA) website for more information.
Note: Be sure to keep details on the disposition on file in case the CRA asks to see them at a later date. Include information such as what was disposed of and why, original purchase date, proceeds of disposition, adjusted cost base (ACB), and outlays and expenses.
Generally, you can deduct 50% of the amount of the loss from your income. This amount is called the Allowable Business Investment Loss (ABIL).
Chart 6 of form T4037: Capital Gains is used to calculate your ABIL for federal tax purposes. If you’re a resident of Québec, you’ll also use form TP-232.1-V to calculate the amount for your provincial return. For more information on business investment losses in Québec, visit the Revenu Québec website.
If your ABIL is greater than your income, you can apply the excess amount to another year. Unused amounts can reduce your income for the past 3 years or be carried forward for up to 10 years.
What types of eligible expenses can I claim?
Depending on the asset that you sold, there are a number of different expenses that you might’ve had to pay in order to sell them. These can include brokerage and legal fees and, in some cases, accountant or notary fees. For more information, refer to the Revenu Québec website.
Where can I find information about the shares or debt that I sold?
As you complete the TP-232.1-V page in H&R Block’s tax software, you’ll need to indicate the number and class of the shares (or the type of debt) that you’ve disposed. Generally speaking, you’ll receive a record of transaction or a statement from the broker that handled the sale.
For example, your statement might contain the following information:
Number of shares sold: 250
Your entry then, on the TP-232.1-V page, might look something like this:
Where do I claim this?
Follow these steps in H&R Block’s tax software to file your 2016 taxes:
- On the PREPARE tab, click the LET’S TALK ABOUT 2016 icon.
- Select the checkbox labelled I had investments and/or investment income, or I bought and/or sold property.
- Click the PENSION PLANS AND INVESTMENTS icon. You’ll find yourself here:
- Under the INVESTMENT INCOME heading, select the checkbox labelled Loss from a business investment.
- If you’ve indicated that you’re a resident of QUÉBEC, also select the checkbox labelled Business investment loss (TP-232.1-V).
- Click Continue.
- When you arrive at the page(s) for your Business investment loss, enter your information into the tax software.
Where can I learn more?
- Business investment lost (CRA website)
- Business investment lost (RQ website)