Old Bankruptcy, New Tax Bill: How Loss Denial Affects Your Business

Описание: 25 years after his bankruptcy discharge, CRA reduced his capital loss carryforwards — and his tax bill increased.

In Om Gupta v. The King, 2023 TCC 82, the Tax Court of Canada clarified an important issue for business owners: what exactly is legally determined on a Notice of Assessment?

For many small business owners, capital loss carryforwards form part of long-term tax planning and cash flow management. When those balances change, the impact can include:

• Increased taxable income
• Higher tax payable
• Cash flow pressure
• Disruption to dividend or sale planning

In this case, the taxpayer believed his loss balances were finalized because they appeared on past Notices of Assessment for years. The Court explained that a Notice of Assessment determines tax for that specific year. Loss balances shown on the notice are informational unless a formal Notice of Determination is issued.

When CRA reassessed an open year, it applied the bankruptcy provisions of the Income Tax Act and adjusted the carryforward balance. The Court upheld that approach.

In this video, I explain:

• Why the appeal was dismissed
• The difference between an Assessment and a Determination
• How old bankruptcy events can affect current-year tax
• Why business owners should review historical loss carryforwards

Full case link:
https://decision.tcc-cci.gc.ca/tcc-cc...

If you are a small business owner relying on old loss balances, especially after bankruptcy, restructuring, or major asset sales, it may be time for a technical review.

Cloudiverse CPAs Inc. helps business owners in Burnaby and across Canada:

• Review capital and non-capital loss carryforwards
• Align tax planning with defensible balances
• Protect cash flow from unexpected reassessments

Contact:

Email: [email protected]

Phone: 604-200-4027