Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
lusobepa
New Member

I gave $40,000 loan to someone. He was supposed to pay it back in 2 years with an interest but only paid $2,940 and went bankrupt.How to show this loss in my tax return?

 
1 Reply
AHMiah1
Level 3

I gave $40,000 loan to someone. He was supposed to pay it back in 2 years with an interest but only paid $2,940 and went bankrupt.How to show this loss in my tax return?

According to the Canadian government, If a debt is owed to you (other than a debt under a mortgage or a debt resulting from a conditional sales agreement), and it remains unpaid after you have exhausted all means to collect it, it becomes a bad debt. 

The debt will be a capital loss in the following situations:

  • You acquired it to earn income from a business or property
  • You acquired it as consideration or payment for the sale of capital property in an arm's length transaction

In most cases, the capital loss is equal to the adjusted cost base of the debt. To claim a capital loss on a bad debt, you have to file an election with your income tax and benefit return. To make this election, write and sign a letter stating that you want subsection 50(1) of the Income Tax Act to apply to the bad debt. Attach this letter to your return.

 

If the bad debt involves a small business corporation, see Allowable business investment loss (ABIL).

 

Thank you for choosing TurboTax. 

 

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.48m
Members

2.61m
Discussions

v