In a November 16, 2015 French Tax Court of Canada case (Delisle vs. H.M.Q., 2013-1829(IT)I), at issue was whether the taxpayer was entitled to claim an ABIL of $21,457 representing 50% of the outstanding debt owed to him by his spouse’s company in 2007. In 2006, the company’s creditors accepted a proposal under the Bankruptcy and Insolvency Act.

In this case, the company’s creditors accepted a bankruptcy proposal in 2006, effectively releasing the company from the debts and obligations owed to its unsecured creditors. As such, the outstanding debt to the taxpayer was written off and ceased to exist at this time, in 2006. At the end of 2007, no debt was owed to the taxpayer.

As Subsection 50(1) requires that the debt must be outstanding at the end of the tax year, the Court found that the taxpayer was not entitled to claim the ABIL in 2007 (as the debt was not outstanding as at December 31, 2007). 

For further information see VTN Monthly Tax Update Seminar, Issue No. 413