You’re quite correct @abechew309 - there is not sufficient detail here to do a complete analysis and determine what is truly appropriate. But, based on the few details stated, I don’t think anyone is going to care whether a final T2 is even filed (except those of us who like to see things properly completed and closed off).
If it was a $400,000 SHL balance I would do a LOT more digging and documenting before even preparing the T2. Where did that balance come from? How can it exist without some assets to show for it? etc.
For a $4,000 SHL balance I’m not going to spend more than 4 minutes deciding what to do about it. The client isn’t going to pay me an extra $400 to figure out whether it’s legitimate or not, and CRA isn’t going to freeze their bank account to collect a possible $400 in tax revenue. I’d set it all to zeros, and tell the client what’s most likely to happen (i.e. nothing), and what consequences there might be if CRA does question it (i.e.at most, $400 tax payable).
It’s not uncommon for a subscription on stock with NPV in Canada.
If you try to file a premature dissolution without the certificate, CRA will hold the return for review, as you need to indicate the dissolution date in the T2 (and they may request to see it anyways from my experience).
Section 80(12) & (13) relates to commercial debt obligations (which needs a provision to accrue interest in order to qualify as a commercial obligation from my understanding), not applicable to this situation at all, but I understand your reasoning for mentioning it beyond the facts of this particular circumstance.
Keep in mind I am only speaking from an accountants point of view… the formality of applicable law (outside of the act itself) is beyond my scope.
Thanks for the response. The Common Shares account had $200. But I made it zero by crediting Shareholder Loan. Because the corporation is dissolved, the shares would have been cancelled. Would you do it differently and leave the $200 in the Common Shares account in the Final T2?
I have a similar situation. A small company was dissolved with a shareholder loan payable of $10,000 (credit) and retained earnings of $10,000 (debit). In the past, I left it as is on GIFI 100. However, after reading this thread, I see that most practitioners zero out the final balance sheet.
The opening retained earnings (GIFI 3660) show a $10,000 debit balance, and the ending retained earnings (GIFI 3869) should be $nil.
Which GIFI field code should be used to reduce retained earnings from a $10,000 debit to $nil?
I know it’s not the right time to ask T2 questions in the middle of T1/T3 seasons, but any insights would be appreciated.
Thank you for your response. When I attempt to bring the final balance to zero, I encounter an error message—likely because I deleted the opening retained earnings.
The image below shows the balances before I deleted the opening retained earnings
Just zeroing it out like that doesn’t make sense from an accounting perspective. It’s most likely a gain on debt settlement since it’s an amount that the corp never had to repay. Note that the debt settlement tax provisions would typically not apply here.
After reading replies a couple of times, I think most practitioners aim to zero-out the balance sheet because a corporation (under certain provincial laws) cannot be dissolved while it has outstanding liabilities.
I could be wrong, too.
Chances are nothing will happen. It’s very unlikely to be looked at. But code 3740 isn’t correct. I would generally advise not filing a T2 that contains information you know to be false.
Thanks! From your comments, I understand that a shareholder loan is recorded as income for accounting purposes when the company is voluntarily dissolved without repayment due to having no remaining assets. However, for tax purposes, it isn’t taxable because the debt forgiveness rules don’t apply to shareholder loans.
In Alberta a corporation can be dissolved if it cannot make its registration obligations for more than one year. Most wait the full two years, in which case registries will deregister the corporation.
