CRA indicates that a loss likely cannot be recognized on writing-down shares of a lossco with no assets or liabilities

An individual holding a former small business corporation with no assets or liabilities but with significant non-capital losses ("Lossco") claims an allowable business investment loss under ss. 50(1)(b)(iii) and 39(1)(c), and then transfers Lossco to a corporation owned by his father (i.e., a related but unaffiliated company).

Before grudgingly intimating that this loss transfer transaction would appear to work, CRA indicated that the individual likely did not qualify for an ABIL (so that only an ordinary capital loss was realized on the subsequent transfer) for two reasons:  Lossco was not insolvent (it had no liabilities to put it under water); and its tax losses likely gave its shares a positive value.

Neal Armstrong.  Summaries of 5 October 2012 APFF Round Table, Q. 11, 2012-0454061C6 F under ss. 50(1) and 111(1)(a).