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Hello all,

I've got an odd scenario, and would greatly welcome feedback, or direction to whom I may speak with for help (paid professional or otherwise).

I'll keep this as brief as I can:

1. From 2012 - 2016 I worked as a self-employed contractor in professional services, and didn't properly hold back income tax. This has resulted in currently owing CRA over $20k in taxes. I have a payment plan set up with them.

2. 2017 I now have a job with a company that withholds tax (phewf), and don't expect to owe more when I file 2017 (and am monitoring it to confirm)

3. In 2013 I incorporated in Alberta for a small business. I didn't need to, but I did. I put an excessive amount of my own money into it, and while I had revenue, my expenses far exceeded my income, so I have a large loss for 2013/14/15/16.

My main question is, am I able to leverage the tens of thousands of dollars dumped into the corporation (shareholder loan?) against my personal income tax owed to CRA? This is a sunk cost that I will not recover from the corporation.

I've made a lot of mistakes, wasted a lot of money, and am now finally getting my life back on track. It's painful but I've learned a lot along the way.

Thank you for any insight.

Greg
 

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Taxes

Greg, unfortunately not. The corporation and you are 2 distinct entities. I always suggest to my clients, that they start of as sole-proprietors for this very reason. Your losses are now trapped in the corporation.

However, you can carry these loses forward for 20 years. So if at some point over the next 20 years, you have a profitable business, you'll be able to utilize these losses.

Dan
 

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If your Alberta corporation is essentially insolvent and you own shares or a loan receivable from it that is essentially worthless, you may be able to claim an ABIL (allowable business investment loss). Basically half of your loss would become deductible against income in the year you write it off. CRA likes to challenge these and looks very closely when it's your own company so be prepared for that, but it could make a nice difference for you in terms of taxes recovered.
 

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ABIL

If your Alberta corporation is essentially insolvent and you own shares or a loan receivable from it that is essentially worthless, you may be able to claim an ABIL (allowable business investment loss). Basically half of your loss would become deductible against income in the year you write it off. CRA likes to challenge these and looks very closely when it's your own company so be prepared for that, but it could make a nice difference for you in terms of taxes recovered.
Unfortunately, this will not work in this case. You can only have an ABIL when it is an arm's length relationship. Otherwise anyone would be able to create a corporation or lend money to essentially oneself to create a tax deduction.
 
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