The tenant reports the rent that was paid. The landlord does the relevant CECRA reporting.
Thanks for confirming. That what I thought.
CEBA is a loan. It is not an income. There is no taxes on loan. Record the amount received as a Loan. At the end of Dec 2022, if the loan is paid back, then the amount paid back record as Loan Repayments and the amount forgiven (10K) as income in year 2022. If you donât payback the loan, interest will start accruing from Jan 1, 2023 and you have to record the interest payment as an expense and loan repayment as a deduction from loan principle. These are according Accounting Principles.
CRA agents are not educated in Accounting, they know about income tax. I would not ask accounting question to CRA agents.
Respectfully you are incorrect the forgivable portion is included in income as at date of receipt of this loan. CRA website clearly states this under CEBA
As well we have a thread in this forum which quotes all if the statues, etc
The loan itself is not income⌠the forgivable part is⌠if you do not pay it off by date⌠then you can deduct the forgivable part previously included in income
This is not a new concept and is not new for CEBA.
Rachel Thibodeau-Parlee
Some accountants are taking the position that the $10k is not shown as forgiveness of debt on S125 or FSâs but rather adding the income to S1 as an adjustment. If anyone is taking this position can they clarify where on the S1 the adjustment is being made?
I am not saying what is right or wrong at this point because we all know the court will inevitably decide that. Just want to hear everyoneâs views.
With credit given to @Don_Murray for initially finding this buried in the CRAâs online GIFI publication⌠CRA is looking for it to be reported on line 295 (Other Additions) on the Schedule 1.
Point of Interest; Line 605 is a Description for line 295. I can verify the written description you enter on line 605 for instance CEBA Loan Forgiveness - per ITA 12(1)(x) does in fact get transmitted with the Efiled T2 return.
per CRA
*8242
Subsidies and grants
government assistance and subsidy payments (for non-fishing corporations), federal, provincial, territorial, or municipal grants received
- Corporations, including non-profit organizations, can use this item to report federal, provincial, territorial, or municipal grants received.
If COVID-19 related assistance is received, report the amount on line 295 of T2SCH1, Net Income (Loss) for Income Tax Purposes. Do not include it under item 8242.
1 Like
âSome accountants are taking the position that the $10k is not shown as forgiveness of debt on S125â
I would hope that ALL âaccountantsâ would NOT record fictitious entries into their 2020 income accounts, creating income out of thin air.
As noted many times before, one CANNOT prepare T2 tax returns properly without proper Financial Statements being drawn up first.
If the journal entries flowing from the CEBA loan are recorded properly, there is no income on the income statement. (Check the loan terms carefully).
Consequently, there would not be a fictitious entry for it on the S125 either.
Courts have no need to decide issues that already appear in the Act
(See posts by @Rein on 20 November)
The only unusual thing that has occurred is that tax preparers have to use a S1 blank line, since the original S1 was not designed with world-wide pandemics in mindâŚ
And @snoplowguy has usefully found that 605 description handily gets transmitted 
1 Like
@snoplowguy So this relates to corporations - what about the rest of taxpayers. CEBA is not a subsidy or grant until it is. I tend to agree with @sbtaxbooks; even the forgivable part is only forgivable IF the conditions are met. Oops - I also think I agree with @joe.justjoe1; I was writing at the same time he was.
@obhorst
âSo this relates to corporations - what about the rest of taxpayersâ
Not âthe rest of taxpayersâ
I assume that you instead were referring to unincorporated business individuals?
Pursuant to ITA S12(1), my vote would go to S2125 line 8230.
(The T2125 is the one and only reconciliation between income for accounting purposes and income for tax purposes on the Individual T1)
CEBA Loan Forgiveness is included as income in the year that it was received. My understanding that if it is not repaid on time & forgiven, then you can deduct at that time.
@snoplowguy - Thank you very much for your helpful response.
If the taxpayer is receiving funds from more than one COVID-19 related assistance program e.g. $10,000.00 CEBA loan forgiveness & $2,000.00 Canada Emergency Rent Subsidy refund would that total go on one line 295 with one description - COVID-19 related assistance on line 605?
Or is it preferred to use one line per COVID-19 one assistance program?
â& $2,000.00 Canada Emergency Rent Subsidy refund would that total go on one line 295 with one description - COVID-19 related assistance on line 605?â
How would the corporationâs Financial Statements balance in such a case?
.
As noted many many many times before, one CANNOT prepare T2 tax returns properly without proper Financial Statements being drawn up first⌠The Corporationâs Director and the CPA responsible for the Financial Statements would be in very very deep trouble if they produced unbalanced Financial StatementsâŚ
Proper books and records, Section 230 compliance, etc âŚ
.
Some CRA copywriters apparently also need to up their game - 2020 has seen many examples of bungled wording as they mangle their English in their âtaxation by press releaseâ approach to pandemic taxationâŚ
" 8242 Subsidies and grants
government assistance and subsidy payments (for non-fishing corporations), federal, provincial, territorial, or municipal grants received
Corporations, including non-profit organizations, can use this item to report federal, provincial, territorial, or municipal grants received."
With respect to other comments here - regardless of how the F/S are prepared, or by whom, the amount of the forgivable portion of any CEBA loan received is required to be reported as income in the year of receipt under ITA S 12(1)(x), unless deferred under S12(2.2). Period.
CRA is asking for such amount to be reported on Line 295.
IF the loan is subsequently NOT repaid, an offsetting deduction to the income inclusion will be required (presumably on Line 395 IIRC), but that situation will not yet have occurred to any organization that is not yet bankrupt.
Treatment for unincorporated taxpayers is no different, other than as to the reporting mechanism.
Both the law, and the directions provided by CRA are pretty clear.
There are, or may be, other issues related to other subsidies, and issues that may be related to reporting on the F/S of the CEBA loan (many are prepared without reference to GAAP of any form!), but for tax reporting it is what it is.
(FWIW, I personally disagree with CRAâs interpretation, but the tax amount doesnât likely make it worthwhile fighting over.)
I believe the entry would be something like the followingâŚ
-
DR: Cash $40K
CR: Government CRA Loan $40K (liability and payable in the future) -
DR: Government CRA Loan Forgiveness $10K (reduction of the liability)
CR: Loan forgiveness $10K (other income which is the portion thatâs considered âforgivenâ)
If you pay back the full amount in the future, then the adjusting entry J/E would beâŚ
3) DR: Govt CRA loan $30K (Liability B/S)
DR: Loan forgiveness OR Loan expense (Expense I/S) $10K
CR: Cash $40K (Asset B/S)
But if you donât need to pay the full amount in the future year 2022⌠then the J/E would simply be:
4) DR: Govt CRA loan $30K (Liability B/S)
CR: Cash $30K (Asset B/S)
.
No, not if you are referring to recording the receipt (only) of the loan proceeds in the current fiscal year.
Those J/Es would not reflect the contract that the taxpayer has with the financial institution.
The Y/E accountant should/would examine the contract that the taxpayer has with the financial institution, and ensure that the J/Es and accounts reflect that contract exactly (so bookkeepers may wish to bring such matters to the attention of the year-end accountant).
You assume that people actually have a copy of the contract - and, as weâve discussed - many simply donât because it was essentially a click-wrap agreement at most banks. Whatâs available now for documentation does, in most cases, NOT match what they agreed to.
At least we know the âgeneral termsâ b/c those are fixed. Sort of.
.
If a bookkeeper is in the position of working solely on an assumption, and not an actual source document, then the best they could do on the fly is to:
DR Bank (B/S)
. CR Suspense (B/S)
And thereby flag it for the year-end Accountant to fix up later.