" An [allowable business investment loss] ABIL is a type of capital loss which is given special treatment in that one-half of the loss may be deducted against any source of income. Usually, capital losses may only be deducted against capital gains." (See ITA s. 38(c) and s. 3(d).)
You can claim an ABIL in relation to a loss on (a) shares or debt of (b) a Canadian-controlled private corporation that (c) carries on an active business primarily in Canada.
Though Woods J. did not refer to it explicitly, there is another condition for claiming a capital loss set by ITA s. 40(g)(ii): The investment must have been made "for the purpose of gaining or producing income from a business or property". Because she didn't believe that the investment was real, suspecting instead that it may have been a tax fraud because there was so little evidence of any attempt to recover the $100,000 investment, Justice Woods decided that the taxpayer hadn't really invested to make income from property. So, there was no right to an ABIL. (Paras. 34-47.)
See Affordable Sign Service Ltd v. The Queen, (2014 TCC Woods)