Can I purchase a company that has a history of losses to offset the profits of my company?
Allan Madan, CA
Question:
I am thinking of acquiring a loss-generating business and planning on using its loss to offset the profits that my company is generating, can I do this?
Answer:
In certain cases, you can. However, you need to be aware of the “acquisition of control rules”. This prevents a profitable corporation from acquiring a corporation with losses without intending to operate the Loss Company on an ongoing basis.
In order to utilize the losses, there are two criteria need to be met:
- your business needs to be in a similar nature of business as the loss company
- you are planning on continuing the business of the loss company.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
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