An allowable business investment loss (ABIL) may be claimed as a Canadian income tax deduction on a non-interest bearing loan to a Canadian controlled private corporation if there are other reasons for the loan such as dividends or management fees. This principal has been affirmed by the Federal court of Appeal in the Byram decision.
A loss realized on shares of a small business corporation or debt owed by a small business corporation may give rise to an allowable business investment loss (ABIL), 50% of which is deductible in computing your Canadian income tax liability.
If you are called upon to honor an arm’s length guarantee given to a private Canadian corporation that carries out an active business, you may be able to claim an Allowable Business Investment Loss (ABIL) for Canadian income tax purposes.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."