ABIL – Allowable Business Investment Loss $328,161
Background:
A letter was received from CRA Processing Review Department on July 29, 2020 disallowing the Business Investment Loss claimed in 2019. T1 adjustment was filed for 2018 to claim the non-capital loss; the non-capital loss claimed was denied as well. The Review Department requested for supporting documents.
A binder that contained all the supporting documents with an explanation of the source of the business investment loss was mailed to Appeal department within the time limit as specified in the letter.
A CRA letter dated November 19, 2020 was received by my office requesting for additional information and at the same time have denied the full amount of the business investment loss being claimed. The binder that contained all the supporting documents that was previously required to be sent was mailed back to me three weeks earlier. The full amount of the Business Investment Loss claimed was denied even prior to completing the review of all the supporting documents. This situation seems to be odd.
Disallowed business expense:
A client approached me, she was audited by CRA and disallowed the following business expenses:
- Interest $100,000
- Supplies $59,716
- Travel $10,660
- Commission $23,983
Total $194,359 (disallowed expenses)
She also would like me to appeal cash expenses paid for transportation in picking up clients from and to the airport and cash payment to individuals ranging from $200 to $450 dollars. The total of these unsupported cash expenses was $20,000 plus meter parking expense without receipt amounting to $1,958 dollars. I explained to the client that CRA will not allow unsupported cash expenses to be appealed.
I filed the Notice of Objection citing the reasons for filing the Objections, the Relevant Facts with all the supporting documentations. On my objection, I explained the purpose and reasonableness in connection with earning business income in detail, citing the relevant provisions of the Income Tax Act. I also explained the error and confusion on the part of the CRA auditor, the fairness provision and the effect of double taxation. Based on the client explanation, I requested supporting documentation that has to be provided; I explained that there is a very good chance that the above-noted disallowed amount can be allowed. On the first appeal only the supplies expense was allowed. On my follow-up appeal all expenses were allowed. Prior to filing my follow-up objection, I advise the client to pay all the taxes she owed including the tax on expenses that were not allowed. I assured her that CRA is not going court. It took several months for the Appeal Division to respond. The appeal was very successful. I received a copy of the letter from the Minister of National Revenue, notifying my client that everything that was appealed allowed in full.
My client received a refund of $96,238.23 (Refer to CRA Notice of Re-assessment)