An allowable business investment loss (ABIL) is a portion of a business investment loss — a capital loss on shares or debt of a small business corporation — that the Income Tax Act allows to be deducted against all sources of income rather than only against capital gains. The ABIL equals the same inclusion-rate portion of the loss that would apply to an ordinary capital gain.
A business investment loss generally arises where a taxpayer disposes of shares or debt of an insolvent or bankrupt small business corporation, including a deemed disposition under the worthless-securities election. Because an ABIL offsets ordinary income, it is more valuable than a regular capital loss. The deductible amount can be reduced by capital gains exemptions previously claimed, and an unused ABIL converts to an ordinary non-capital loss after a number of years.