Lines 21698, 21699 and 21700 – Business investment loss

If you had a business investment loss in 2024, you may be able to deduct a portion of this loss from income. The amount that you can deduct is equal to your business investment loss for the year multiplied by the rate equal to your capital gains inclusion rate for the year. This amount is called your allowable business investment loss (ABIL).

On this page

• What is a business investment loss
• What happens when you incur an ABIL
• Completing your tax return

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 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 2021, 2022, or 2023, complete Form T1A, Request for Loss Carryback, and include it with your 2024 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.

Completing your tax return

Complete Schedule 3, Capital Gains or Losses while referring to Chart 6 – Claiming an allowable business investment loss to determine your ABIL and, if applicable, your business investment loss reduction.

Claim the deduction for the ABIL on line 21700 of your income tax and benefit return. For the 2024 tax year, enter the gross business investment loss on line 21698 for losses in Period 1 and on line 21699 for losses in Period 2.

Forms and publications

• Guide T4037, Capital Gains
• Schedule 3, Capital Gains or Losses
• Form T1A, Request for Loss Carryback
• Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length
• Archived Interpretation Bulletin IT-232R3, Losses – Their deductibility in the Loss Year or in Other Years
• Income Tax Folio S4-F8-C1, Business Investment Losses

Related topics

• Line 25200 – Non-capital losses of other years
• Line 25300 – Net capital losses of other years
• Line 25400 – Capital gains deduction
• Summary of loss application rules