Running a money-losing business doesn't always mean you can claim tax losses

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It’s not easy running a small business, especially in the early years. Whether a business will ultimately become profitable, producing income that will ...

disallowed these losses on the basis that the taxpayer had no source of income and, therefore, no true business.

The taxpayer, when asked what he did to help make the website profitable, said he planned to modify the website to allow it to be viewed on social media and mobile devices, and that he “increased his advertising.” In addition, he introduced some vitamin products in 2011 to the website in a multi-level marketing scheme that generated a commission loss of $2,186 that year.

The judge also cited a pair of 2022 Federal Court of Appeal decisions concluding that an activity without any personal element must be conducted with a view to making a profit to constitute a source of income. The taxpayer also tried to argue that the CRA wasn’t entitled to reassess his 2008 taxation year because it was beyond the normal three-year reassessment period. To do so, the CRA must demonstrate, on a balance of probabilities, that a taxpayer made a misrepresentation attributable to “neglect, carelessness or wilful default or committed fraud” in filing his tax return.

 

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Running a money-losing business doesn't always mean you can claim tax lossesTo claim a business tax loss with the CRA, you must have a legitimate business, run in a commercial manner with a view to a profit. Read on.
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