Loans received because of shareholdings

Persons and partnerships are generally taxable on benefits received from a corporation of which they are a shareholder. Depending on the particular facts, where a person or partnership receives a loan or incurs a debt because of a shareholding:

A taxable benefit does not apply if the loan or debt is required to be included in the income of a person or partnership.

Therefore, a person or partnership should determine if the amount of the loan or debt is required to be included in income before considering whether a taxable benefit may arise. A taxable benefit cannot be included in income voluntarily to avoid any requirement to include the amount of a loan or debt in income.

Loans received or debts incurred because of shareholdings may give rise to a taxable benefit when all of the following conditions are met:

If these conditions are met, the person or partnership (for example, a shareholder) is considered to receive a benefit in the tax year that is equal to:



A person may be an individual, a corporation, or a trust.

The calculation of the benefit is modified where one or more such loans are considered to have been made under a back-to-back shareholder loan arrangement. For more information on back-to-back shareholder loans, see pages 54 and 55 of Tax Measures: Supplementary Information.

Include the shareholder's benefit under code 117, "Other income," in the "Other information" area at the bottom of the T4A slip.

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