My company ceased operations and was left with substantial debt. I am personally liable for some of the debt. An inability to pay this debt immediately has left me in personal bankruptcy. Some of this (now personal) debt was for leased equipment. More was lawyer and receiver fees from one of the banks. I have just enough equity in my property that means I will have to settle the debts to all creditors.

I'm doing the closing books for the company and have a question. Can I expense these personal debts to the company, including the sale tax on them?

Obviously, this does not help me pay the debt; the company would just be left with another loan to me that it cannot pay. However, there are two potential benefits I can see.

1) It increases the size of my investment loss in the company. I can apply 50% of that as a credit against my personal taxes.
2) I was also thinking that the sales tax (Canadian GST) on the expense would lessen the company's sales tax owing. (This is another debt that will ultimately fall to me, because the tax man holds me personally liable as a director)

Anyone have any expertise in the area?

Thanks for you help

Don't know how Canadian law works but GST is usually a pass through, that is you pay GST and recoup it as an offset to GST collected in sales. In order for the Company to acquire an asset arising from GST payment you must be able to create a GST liability for tax you are going to collect from the company and pass to the government. As you have acquired a company debt, you could invoice the company for the debt you acquired including the GST. You see the company has already acquired the GST asset through the original transaction and may have already extinguished the asset by offsetting the cost against revenue.

You should discuss these issues with your tax office.

GST is goods and services tax to anyone here who doesn't know CDN tax. OP should discuss this with his tsx accountant for proper usage.