Loans received because of shareholdings

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

  • the loan is received, or the debt is incurred, by a person or partnership (except when the person is a corporation resident in Canada or the partnership is one in which each partner is a corporation resident in Canada)
  • the person or partnership is one of the following:
    • a shareholder of a corporation
    • connected with a shareholder of a corporation, or
    • a member of a partnership or beneficiary of a trust that was a shareholder of a corporation, and
  • because of these shareholdings, the person or partnership receives a loan from, or incurs a debt to:
    • the corporation,
    • a corporation related to that corporation, or
    • a partnership of which the corporation or the related corporation was a member

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:

  • the interest on the outstanding portion of each loan and debt calculated at the prescribed rate for the period in the year during which it was outstanding


  • the interest for the year that any party (such as the person or partnership) paid on each loan or debt in the year or no later than 30 days after the end of the year


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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