Comments on: How Shareholder Loans Affect Your Income Tax

By: Tax Guy

Tax Guy — Fri, 10 Feb 2012 02:23:10 +0000

You can lend a corporation money. It can pay you interest. The interest is tax deduction for the corporation and you include the interest in your income. Repayment of the loan is just that…no tax consequences.

If you have trucking business, I would suggest the truck is not a passenger vehicle and therefore class 10 not restricted by 10.1.

You should consider getting professional advice in these matters! The advice is well worth the cost.

By: sam

sam — Wed, 08 Feb 2012 20:29:41 +0000

Hey,

I have couple of questions for you and your advice is highly appreciated

1st Q: If I want to incorporate a business that will be specialized in trucking services and distribution only, me as the only director of the business and owner, can I give or lend my business a loan with interest from my personal funds??
For example: when I open the business, I give my business a loan ( or can we call it a shareholder loan) in the amount of $ 50,000 payable in one year with interest of 10%, so after one year I will take the $ 50,000 back plus $ 5000 interest.
So, is that possible to do, or the loans are only acceptable with interests from the Financial Institutions (like banks)?? If its allow to do that by the director or the shareholders of the business, so this interest income of $ 5,000 will be considered as Interest Expense to the business and Interest income to the director, so do the business has to issue a T5 for this income or no, and how the director can report this income in his income tax T1 ??

2nd Q: As for the CCA, I know that the Auto Class is 10.1 which allow the maximum cost to capitalize of $ 30,000 at the rate 30%. So if the business bought a truck for $ 50,000, we only allow expensing $ 30,000 at 30% or the truck has a different class and cost allowance??

Have a good day

Sam

By: sheldon

sheldon — Wed, 08 Feb 2012 17:38:31 +0000

I am to be paid out a dollar value from the corporation – which I loaned money to in order to see the business prosper – the corp wants to now pay me back – do I pay taxes on my money I have loaned the corporation ( i loaned the money to the corporation oer 20 years )

By: Dave

Dave — Wed, 08 Feb 2012 16:13:13 +0000

Hi Tax Guy,
I am a sole practitioner chartered accountant through an Alberta professional corporation (though not a tax specialist, hence the question). My principle residence mortgage is due to renew in a couple of months. Would it make sense to use the principle residence rule to loan myself the money to refinance my home and then set up a repayment schedule with market interest to pay it back over time?

Thanks,
Dave

By: Tax Guy

Tax Guy — Tue, 07 Feb 2012 15:51:37 +0000

If you go bankrupt personally, your shares will be part of the bankruptcy. His company could end up being owned partially by your trustee. 49% would be a better proportion.

Yes he can redeem your shares but likely he would not be able to do that without killing the company.

By: honey

honey — Mon, 06 Feb 2012 06:59:21 +0000

I don’t have a good credit record and my husband wants to open a company in his own name but will make me a 50% shareholder.Is this wise and how does it work,I will be running the company full time,what I want to know is should we separete what happens interms of the business,do I get my share or he can just buy me out without my consent.

Thanks Honey.

By: Tax Guy

Tax Guy — Sun, 05 Feb 2012 19:39:59 +0000

There will be a benefit if it’s interest free. It’s difficult to say in the forum
However.

By: Mark

Mark — Sat, 04 Feb 2012 02:39:09 +0000

I don’t know if this is the right forum for this question but my future employer has loaned me money in advance of my starting work with them to help cover expenses for further training. This sum is to be repayed within 6 months of my starting work with them. Is this loan considered taxable and should I report it as income (i.e. professional income)?

By: Tax Guy

Tax Guy — Wed, 01 Feb 2012 21:16:52 +0000

Its not clear what you are doing or wanting to achieve. I can tell you that you that you should engage a professional as you may end up paying thousands of dollars in tax.

By: Bill

Bill — Wed, 01 Feb 2012 20:25:28 +0000

Hello,

Me and another shareholder are in the process of opening up a company and somehow imputing our house (which we just purchased but do not live in) as an asset or through trust (not sure of the details just yet)

We are in the process of applying for permits where the cost could exceed $15,000. Now my other shareholder wants to take out a line of credit (he does not have the cash) whereas i have the cash.

So i want to use my personal cash in the endavour but receive this cash back at the end of our project (1.5 years).

If i loan the $15,000 can i loan it as a shareholder loan, and after the sale of our property (through the company) get it back tax free? (through dividends or salary?)

i hope this is clear….

tHANKS