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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 1493
Experience:  Tax preparer with 23 years experience, including US/Canada tax returns.
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I loaned my former employer $ 40,000.00 from my RSP,The

Customer Question

I loaned my former employer $ 40,000.00 from my RSP,The company is now out of business.
can I claim this as a loss,if so were should it be used.
Submitted: 7 months ago.
Category: Canada Tax
Expert:  Angie replied 7 months ago.
Yes...you can deduct this as non business bad debt, if you have taken reasonable steps to collect. The IRS verbage on this is as follows: Nonbusiness Bad Debts - All other bad debts are nonbusiness. Nonbusiness bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless nonbusiness bad debt.A debt becomes worthless when the surrounding facts and circumstances indicate there is no reasonable expectation of payment. To show that a debt is worthless, you must establish that you have taken reasonable steps to collect the debt. It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You do not have to wait until a debt is due to determine that it is worthless.Report a nonbusiness bad debt as a short-term capital loss on Form 8949 (PDF), Sales and Other Dispositions of Capital Assets, Part 1, line 1. Enter the name of the debtor and "bad debt statement attached" in column (a). Enter your basis in the bad debt in column (e) and enter zero in column (d). Use a separate line for each bad debt. It is subject to the short-term capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return. (Keep in mind that you can only claim a loss of $3000.00 per year, so it will carry over each year until there is no loss remaining. )
Expert:  Angie replied 7 months ago.
I am so sorry...I just realized this is a canadian tax question. I will opt out.
Expert:  Arthur Rubin replied 7 months ago.
Is this an RRSP? I can find many uses of the acronym RSP in Canada, but none which have tax consequences.
Customer: replied 7 months ago.
This is a RRSP in CANADA
Expert:  Arthur Rubin replied 7 months ago.
RRSPs are tax-deferred, so that you cannot claim a loss. Furthermore the loan may be a prohibited investment or a non-qualified investment. Definitions from http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/glssry-eng.html Prohibited investmentThis is property to which the RRSP or RRIF annuitant is closely connected, it includes:a debt of the annuitant;a debt or share of, or an interest in, a corporation, trust or partnership in which the annuitant has a significant interest (generally a 10% or greater interest, taking into account non-arm's length holdings); anda debt or share of, or an interest in, a corporation, trust or partnership with which the annuitant, does not deal at arm's length.Qualified investmentAn investment in properties, including money, guaranteed investment certificates, government and corporate bonds, mutual funds, and securities listed on a designated stock exchange.

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