Lost investment

[dgmartinez]

So, here is the thing.
About 5 years ago, I bought a crap load of class A shares in a startup company, the company was doing good till the economy went to sh*t.

Now I found out last week that they have declared bankruptcy, and I am now out a good amount of cash.

My question is this.

Would i be able to claim this as a capitol loss next year on taxes or am I screwed with no way to get a silver lining out of this.

Thanks
Dan

[Xtrema]

Yes.

But capital loss can only apply against capital gain. For now, you can carry forward capital loss indefinitely but it'll get compex as tax rate changes year after year and the calculation will get more complicated the longer to drag it out.

[KappaSigma]

Or you can carryback capital losses 3 years and use them against CG during those periods. Do you have any capital gains in the last 3 years to use against before they fall of the table?

[natejj]

I think you have 7 or 10 years to apply them against future CG... am I right? Or is there no limit.

[Mckenzie]

There is a silver lining in this cloud if the company is public, but a platinum lining if it is private.

Thinking outside the capital gains / capital losses box, the hail mary of ABIL comes into play, or allowable business investment loss. Not many people know about this, but it is very useful for those 'start up' investments that dont get off the ground and leave shareholders holding a smelly bag of shares.

Check it out: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/217-228/menu-eng.html


You should be ok if the company meets the criteria.

[KappaSigma]

Just remember that an ABIL may grind down your future use of personal capital gains expemotion.

[dgmartinez]

Thank you McKenzie.

Since I really do not have an capitol gain anywhere as I usually do not invest in stuff, all I have is this lost investment.
It looks like the company would qualify, so the ABIL would be great for me.

Thanks Again.
D

[cheai82]

Original Post Removed. (Please read the Forum Rules and Terms of Use (http://forums.beyond.ca/articles.php?action=data&item=1) before posting again, or risk getting banned).

[cheai82]

Original Post Removed. (Please read the Forum Rules and Terms of Use (http://forums.beyond.ca/articles.php?action=data&item=1) before posting again, or risk getting banned).

[Mckenzie]

Originally posted by KappaSigma
Just remember that an ABIL may grind down your future use of personal capital gains expemotion.

I would much rather benefit from utilizing a loss to get some cash back now then potentially pay more tax in the future, especially since that really depends on investing in / starting a succesful SBC that meets the requirements for the LCGE. I think the OP is better off with cash in hand.

My .02


Originally posted by dgmartinez
Thank you McKenzie.

Since I really do not have an capitol gain anywhere as I usually do not invest in stuff, all I have is this lost investment.
It looks like the company would qualify, so the ABIL would be great for me.

Thanks Again.
D

No problem. You will need to get your facts and documents together for an accountant to do it or you can always do it yourself, but the forms may be complicated and the CRA looks into stuff like this (don't panic- just need the documentation / facts and it's all good).

[KappaSigma]

Originally posted by Mckenzie


I would much rather benefit from utilizing a loss to get some cash back now then potentially pay more tax in the future, especially since that really depends on investing in / starting a succesful SBC that meets the requirements for the LCGE. I think the OP is better off with cash in hand.

My .02



All depends. We dont know the persons other private holdings. FOr example, if you hold a private company who is going public (very common for private junior oil and gas companies), you can freeze your share price with a special election and basically use up your CG election to increase your cost base on the new public shares.