My corporate client bought tangible (machines) and intangible assets (rights) of a vending machine business and found out in the following year that it was a scam so my client doesn’t own any of those assets. A slim chance he can file a lawsuit and win the assets back. In this case, how should I record this? Non-capital loss?
Notwithstanding questions about exactly how this transpired (but I AM curious)…there is an interesting technical question to this. (I originally thought about it in the context of a T1, but see that it’s corporate, so assume there is an already-operating corp that did this.)
If the corp has an existing similar business, I don’t really see an issue…no different than if it buys goods for resale that never arrive…it was done in the context of business and it’s either a loss by theft (defalcation) or similar.
If there is NO existing or similar busines…that makes the question more challenging…not sure there’s a claim to it, but I s’pose one can write it up and see if CRA queries it. May depend on whether the loss is $10K or $10M (not that it should matter).
It was the only business operating and no other business. The total asset purchase price was close to half million dollars..
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Yikes! Quite the scam.
Depending on where your client is located I have a legit vending machine business for sale at a fraction of the price he paid.