27 January 1999 External T.I. 9830125 - SEPARATE PERSONS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Can an individual shareholder deduct the unused corporate losses?

Position: NO

Reasons: No provision in the Income Tax Act to allow it

XXXXXXXXXX 983012
C. Tremblay
January 27, 1999

Dear XXXXXXXXXX ,

Re: XXXXXXXXXX

This is in reply to your letter of November 10, 1998, regarding the deductibility of the business losses of the above-named corporations.

You advise us that these corporations, although not bankrupt, have been inactive since 1993, and have accumulated income tax losses. Further, you state that the shares of the corporations are not worth very much. You ask us whether the corporate unused losses can be deducted from the personal incomes of the individual shareholders in their respective income tax returns.

A corporation and its shareholders are separate persons under the Income Tax Act (the “Act”) and, in general terms, there is no provision under the Act for individual shareholders to deduct the losses of the corporations in which they hold shares. Accordingly, the unused income tax losses of the above-named corporations, cannot be deducted by the individual shareholders.

Any further questions related to the above taxpayers should be directed to the Taxation Services Office that serves your area since it is responsible for determining the tax consequences of completed transactions and their implications to specific taxpayers.

We caution that the above comments are general only, and do not constitute an advance income tax ruling.

We trust our comments will be of assistance to you

Yours truly,

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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