Can a client deduct money lent to a writer ?

Client has given several thousand $ to person writing a book. Can he deduct this as an investment and if so where on the return.


This would really depend on whether there is an appropriate paper trail for the so-called "Loan".

When money is invested in a manner that will produce an income, it is a "Capital" investment.  When that investment declines in value, and the investment is disposed of  at a loss, or if the investor cannot dispose of it, and feels it will produce no further monetary value, then it may be considered a loss.  This might be shown as a Capital Loss on a tax return.  Capital losses may be used to reduce Captial Gains; which are taxed at 50% of the amount of all other income, but Capital Losses do not reduce normal income (except in rare circumstances, like upon death).

So, the loan must have been made in return for a payment of interest, or a share of the writing Royalties (i.e., to earn income).

Next, when you make a claim for a Capital Loss on some "unknown" investment, CRA will likely come asking for proof.  If you cannot prove that there was an arrangement to earn income then they may disallow the claim; hence the paperwork.  Ensure there is a loan agreement outlining the amount of the loan and the amount of interest or royalties to be earned by the lender (paid by the borrower).
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