A corporate client has a huge loss from a past business and now he wants to start a new business and utilize the non capital loss. Is it okay or does it have to be in the same business?
I believe that rule is only if there is an acquisition of control.
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If he uses the old corporation to run the new business I think he can. He can’t transfer losses from one corporation to another as far as I am aware.
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I think he can if it is the same type of business doing same or similar activities. I’m not 100% sure of that, but do recall something like it. Worth you while to check it out.
The general rule in subsection 111(5) is that no amount of the (acquired) corporation’s non-capital loss or farm loss for a tax year ending before the acquisition of control is deductible for a tax year ending after the acquisition of control.
However, a loss carryover is allowable if, simply put:
- the business was carried on for profit or with a reasonable expectation of profit (REOP), and
- the loss is applied against income from that business or a similar business carried on by the corporation.
As well, these non-capital carryover losses cannot be used against taxable capital gains arising after the acquisition occurred. ABILs cannot be carried-over, post acquisition, either.
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