Personal Finance

Can I have T2125 included without T4A

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  • Mar 17th, 2020 1:18 am
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[OP]
Jr. Member
May 12, 2014
193 posts
71 upvotes
Brampton, ON

Can I have T2125 included without T4A

Hi, one of my friend got mortgage licence last year, incurred some expenses in getting the licence (like FSCO fees, brokerage fees, etc). But he didn't make any income (No T4A).

I understand that if you make commission income and get T4A, you can write off your business related expenses in T2125 agianst that T4A.

Now in this case, there's no income and no T4A, can he still include T2125 in his return to write off expenses?
7 replies
Deal Addict
Jul 28, 2014
1080 posts
527 upvotes
tor1deal wrote: Hi, one of my friend got mortgage licence last year, incurred some expenses in getting the licence (like FSCO fees, brokerage fees, etc). But he didn't make any income (No T4A).

I understand that if you make commission income and get T4A, you can write off your business related expenses in T2125 agianst that T4A.

Now in this case, there's no income and no T4A, can he still include T2125 in his return to write off expenses?
no
Jr. Member
Feb 9, 2020
175 posts
102 upvotes
tor1deal wrote: Hi, one of my friend got mortgage licence last year, incurred some expenses in getting the licence (like FSCO fees, brokerage fees, etc). But he didn't make any income (No T4A).

I understand that if you make commission income and get T4A, you can write off your business related expenses in T2125 agianst that T4A.

Now in this case, there's no income and no T4A, can he still include T2125 in his return to write off expenses?
frostvowel wrote: no
Expenses (that are non capital) are deductible even if there is no income in that year as long as there is reasonable expectation of profit. Happens all the time when a business is just starting up...
Deal Addict
Jul 28, 2014
1080 posts
527 upvotes
PolarisCPA wrote: Expenses (that are non capital) are deductible even if there is no income in that year as long as there is reasonable expectation of profit. Happens all the time when a business is just starting up...
debatable... he would have to prove he was actively looking for clients, which I doubt if all he incurred were licensing fees
Jr. Member
Feb 9, 2020
175 posts
102 upvotes
frostvowel wrote: debatable... he would have to prove he was actively looking for clients, which I doubt if all he incurred were licensing fees
Hence reasonable expectation of profit. How can you have reasonable expectation of profit if you're not looking for clients? If you're just incurring fees and doing nothing to try and generate revenue... that's not reasonable expectation of profit.
Deal Addict
Jul 28, 2014
1080 posts
527 upvotes
PolarisCPA wrote: Hence reasonable expectation of profit. How can you have reasonable expectation of profit if you're not looking for clients? If you're just incurring fees and doing nothing to try and generate revenue... that's not reasonable expectation of profit.
yes... that's what i just said. I am agreeing with you on that point
[OP]
Jr. Member
May 12, 2014
193 posts
71 upvotes
Brampton, ON
Licencing happened in the final months (Nov-Dec). But it's true that being new and not much time left in 2019 to try for revenue generation, not much work was done. Just had expenses related to licencing. Having said that, should he go for writing off expenses in T2125?
Jr. Member
Feb 9, 2020
175 posts
102 upvotes
tor1deal wrote: Licencing happened in the final months (Nov-Dec). But it's true that being new and not much time left in 2019 to try for revenue generation, not much work was done. Just had expenses related to licencing. Having said that, should he go for writing off expenses in T2125?
Again, the key here is reasonable expectation of profit. Just because there wasn't much time left in 2019 to try and solicit client does not necessarily mean there is no reasonable expectation of profit. It's a question of facts. What did he do after he got the license? Did he do any activity that would support that there is some expectation of profit? (of course, the reverse can also be true - maybe he really did only get his license just to sell his own house or something)

There are a lot of resources on this topic. Try googling "reasonable expectation of profit" and you'll get a ton of hits. I suggest reading through a couple of those as a start.

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