Plain meaning
An amount a corporation lends or advances to a shareholder or connected person, potentially giving rise to income inclusion or benefit rules.
Also called
loan to shareholder
shareholder loans
shareholder debt
Key points
- A loan or debt owing by a shareholder to a corporation can be included in income unless an exception applies.
- Repayment timing is important, and a series of loans and repayments may not avoid the rules if it amounts to a continuing debt arrangement.
- Interest may also matter because low-interest or interest-free loans can create taxable benefit issues.
- Different rules can apply to employees, housing loans, ordinary-course lending businesses, and certain corporate reorganizations.
- Records should clearly show the loan terms, advances, repayments, interest, and corporate authorization.
Why it comes up
Shareholder-loan rules affect owner-managers, private corporations, audits, taxable benefits, and repayment planning.