Lines 21699 and 21700 – Business investment loss

If you had a business investment loss in 2023, you may be able to deduct half of the loss from income. The amount of the loss you can deduct from your income is called your allowable business investment loss (ABIL).

What is a business investment loss?

A business investment loss results from the actual or deemed disposition of certain capital properties. It can happen when you dispose of one of the following to a person you deal with at arm's length:

a share of a small business corporation
a debt owed to you by a small business corporation

For business investment loss purposes, a small business corporation includes a corporation that was a small business corporation at any time during the 12 months before the disposition.

You may also have such a loss if you are deemed to have disposed of, for nil proceeds of disposition, a debt or share of a small business corporation under any of the following circumstances:

A small business corporation owes you a debt (other than a debt from the sale of personal-use property) that is considered to be a bad debt at the end of the year
At the end of the year, you own a share (other than a share you received as consideration from the sale of personal-use property) of a small business corporation that:
- has gone bankrupt in the year
- is insolvent and a winding-up order has been made in the year under the Winding-up Act
- is insolvent at the end of the year and neither the corporation, nor a corporation it controls, carries on business. Also, at that time, the share in the corporation has a fair market value of nil, and it is reasonable to expect that the corporation will be dissolved or wound up and will not start to carry on business*

* You or a person that you do not deal with at arm's length will be deemed to have realized an offsetting capital gain if the corporation, or a corporation it controls, carries on business within 24 months following the end of the year in which the disposition occurred. You or that person will have to report the capital gain in the tax year the corporation starts to carry on business. This applies if you or the person owned the share in the corporation at the time the business started.

You can elect to be deemed to have disposed of the debt or share of the small business corporation at the end of the year for nil proceeds of disposition, and to have immediately reacquired the debt or share after the end of the year at a cost equal to nil. To do this, you have to file an election with your income tax and benefit return. To make this election, attach to your return a letter signed by you. State that you want subsection 50(1) of the Income Tax Act to apply.

What happens when you incur an ABIL?

You can deduct your ABIL from your other sources of income for the year. If your ABIL is more than your other sources of income for the year, include the difference as part of your non-capital loss.

Although you can generally carry a non-capital loss back 3 years and forward 20 years, this does not apply to a non-capital loss resulting from an ABIL. Instead, an ABIL that has not been used within 10 tax years will become a net capital loss in the eleventh year.

To carry a non-capital loss back to 2020, 2021, or 2022, complete Form T1A, Request for Loss Carryback, and include it with your 2023 income tax and benefit return (or send one to the CRA separately). Do not file an amended return for the year to which you want to apply the loss.

The unapplied part of your non-capital loss resulting from an ABIL will become a net capital loss in the eleventh year. You can use this loss to reduce your taxable capital gains in any year after.

Note

Any ABIL that you claim for 2023 will reduce the capital gains deduction you can claim in 2023 and future years.

Completing your tax return

Complete Chart 6 below to determine your ABIL and, if applicable, your business investment loss reduction. Claim the reduction for the ABIL on line 21700 of your income tax and benefit return. Enter the gross business investment loss on line 21699 of your return.

Chart 6 – How to claim an allowable business investment loss

Step 1 – Business investment loss in 2023 (enter this amount on line 21699 of your income tax and benefit return)

Line A

Step 2 – If you claimed a capital gains deduction in a previous year, you have to reduce your business investment loss. To determine the reduction, complete the calculation below and enter the result from line 15 on line B. Otherwise, enter "0."

–

Line B

Line A minus Line B

= $

Line C

Step 3 – Allowable business investment loss

Amount from line C

x 1/2

= $

Line D

Enter the amount from line D on line 21700 of your income tax and benefit return.

Step 4 – Attach a note to your income tax and benefit return that states the:

name of the small business corporation
number and class of shares, or the type of debt you disposed of
insolvency, bankruptcy, or wind-up date
date you bought the shares, or the date you acquired the debt
amount of the proceeds of disposition
adjusted cost base of the shares or debt
outlays and expenses on the disposition
amount of the loss

Calculation of the business investment loss reduction

The reduction calculated below is considered to be a capital loss for the year.

Total of all capital gains deductions claimed from 1985 to 2022

1. For 1985 to 1987, total of the amounts from line 254 of your income tax and benefit returns for these years

x 2

Line 1

2. For 1988 and 1989 (other than for eligible capital property gains), total of the amounts from line 254 of your returns minus any amounts reported on lines 543 and 544 on Schedule 3 (if negative, enter "0")

(a) x 3/2

Line 2

3. For 1988 and 1989 for eligible capital property gains, total of the amounts from line 254 of your returns minus the amount calculated at line (a) above; not to exceed lines 543 and 544 on Schedule 3

x 4/3

Line 3

4. For 1990 to 1999, total of the amounts from line 254 of your returns for these years

x 4/3

Line 4

5. For 2000, amount from line 254 of your return

x 1/IR^{Footnote *}

Line 5

6. For 2001 to 2022, total of the amounts from line 254 of your returns for 2001 to 2018 and line 25400 of your returns for 2019 to 2022

x 2

Line 6

7. Total of lines 1 to 6

= $

Line 7

Total of all other business investment loss reductions for 1986 to 2022

8. Total of amounts reported on line 535 of Schedule 3 of your 1986 to 1994 returns

Line 8

9. Total of amounts reported on line 034 of Schedule 3 of your 1994 to 1996 returns

Line 9

10. Total of amounts reported on line 178 of Schedule 3 of your 1997 to 1999 returns

Line 10

11. Total of amounts reported on lines 293, 178, and 5668 of Schedule 3 of your 2000 income tax and benefit return

Line 11

12. Total of amounts reported on line 178 of Schedule 3 of your 2001 to 2018 returns, and line 17800 of Schedule 3 of your 2019 to 2022 returns

Line 12

13. Total of lines 8 to 12

= $

– $

Line 13

14. Line 7 minus line 13

= $

Line 14

Business investment loss reduction

15. Line 14 or line A from Step 1 above, whichever is less. Enter this amount on line B in Step 2 above and on line 17800 of Schedule 3.

Line 15

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Date modified:: 2024-01-23

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