An Allowable Business Investment Loss
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 principle 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.