Closing Corporate Business

Tax Topics
1

Hi guys,
I just want to make sure that I understand this process correctly for a corporation to cease operating its business activity, especially when there is a remaining of Non-Capital Loss at the time of closing.

  1. As far as I am aware, the Non-capital loss from corporation is not eligible to be transferred to the shareholders of the corporation if the business dissolved!?
  2. If the Corporation ceased the operation of its current business, but start a brand new business with the same business number, could they still utilize the non-capital loss? I could not find the tracking of Non-Capital Loss amount on Business CRA REP!?

Thank you for your insight!!!

2

  1. That’s right, the loss is gone forever (although there are strategies to shift the losses among related companies, no further comments from me on this lol).

  2. Gray area - technically no, but unless there’s a change of control, no one is stopping you either…

5 Likes
3

Depending on the situation, while the non-capital loss wouldn’t be available IF the corporation itself was dissolved then the shareholders MIGHT be able to claim an Active Business Investment Loss for the shares and any shareholder loan the company owed them at the time of dissolution.

1 Like
4

I have done just this in the past with no repercussions. One case had a large ABIL and another had one in the range of $2,000. Neither was questioned.

1 Like
5

I have also done this. CRA did a review and there were no issues. It was over $250k.

6

Are you saying the SHL had a CR balance of over $250k? When CRA reviewed it, what did you provide for proof? I’ve never tried to claim an ABIL on these because the CR balance has usually accrued from hundreds of un-supported transactions - i.e. credits due to business use of home and vehicle, business expenses paid by shareholder personally, etc.

7

This. In practice (from my experiences), we only push for ABIL’s if there is actual formal support for the BIL where it can be traced directly to a loan of some sort. CRA has always been all over these with heavy scrutiny. Again, this is my experience with this.

Funny how this thread went from NCL to ABIL … similar sure, but the legislation regarding these is much much different. We should have a separate thread for this discussion.

1 Like
8

Thanks for confirming. After seeing three posts about claiming ABILs for SHL balances, I started to wonder…maybe you can “get away with it” because CRA laid off so many people recently they don’t have the resources to investigate these? But, no - they ARE being reviewed, and you DO need to support the source of the investment.

Yes, but hopefully this ends that tangent…

9

Yes. This was a couple of years ago, and all corporate bank statements and financial statements were provided for the previous 3 years.

1 Like