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	WHEN IS A LOSS NOT REALLY A LOSS?   A client of mine was asking me what I felt his incorporated plumbing business would be worth if he was to sell it. The client's feeling was that it probably wouldn't be worth much since its shown a loss for the last three years. I told him that he would be surprised at how many small business corporations are willing to buy OTHER small business corporations, JUST to utilize their losses, with no intentions of continuing that particular business.  You see according to Canada Revenue Agency there are different types of losses.  - There are NON-capital losses; (ie. business losses) - these are net losses by any business, either incorporated or sole-proprietor, in any given tax year.  If you were a sole-proprietor you'd show this loss on your annual personal tax return, (T1) as simply a business loss. This loss then gets netted out against any other income you may have in that particular year, (ie. investment, employment, rental) and whatever's leftover becomes your total income for the year. If the loss was not reduced to nil in the year by other income, then it becomes a net non-capital loss.  If you were incorporated, then this loss would go on a corporate tax return, (T2) as net corporate loss of that business, and would not get netted out against anything else.  In either case, Revenue Canada makes an allowance to carryforward seven (7) years OR backward three (3) years, this non-capital loss and net it against other years when the business has a taxable profit.    - There are Capital losses; (ie. investment losses) - these arise by selling anything for less than what you paid for it. These would be netted out in the year of the transaction against any Capital gains, and any excess is a net capital loss.  Revenue Canada allows for these to be carried forward indefinitely and carried backward three (3) years. However, these capital losses can ONLY be used against other years capital gains. In fact net capital losses can be carried forward up to the date of death of the taxpayer and if they're still unable to use them, only then can they be applied against other types of income.  So getting back to my client; you can see why a business that's in a profit position may be willing to pay good money for a business that has unused non-capital losses, if it means they could reduce their taxes.    Losses don't expire on an amalgamation or on the winding-up of a 90% owned subsidiary, thus the business in which the loss was sustained would not have to be continued in order to utilize the losses.  However, for the most part, these transfer of losses can only be made on a prospective basis, in that the current losses can only be applied against future profits of the amalgamated/newly-formed corporation.  So the next time your looking at the books of your business and it looks pretty bleak, just remember there maybe someone out there interested in taking that loser off your hands.
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