Working on a final T2 (up to date of dissolution)
- SH forgive corp $12k (unpaid SH loan balance)
- CORP will pay $4.2k for professional fees
Accounting:
JE:
Debit Shareholder loan $12,000
Credit Other income - Debt forgiveness $12,000
Tax:
- $12,000 - Other Revenue GIFI 8230
STEPS ON T2
- Deduct $12,000 SCH 001
- Use non capital loss available under Section 80 (box 140) SCH 004: $5937
- Remaining forgiven amount multiplied by 50% and added to SCH 001
Calculation:
Debt Forgiven: $12,000 - Non-capital losses from PY: $5,937
=$6,063 x 50%
=$3,031.50
4. Claim insolvency deduction SCH 001
Net income (loss) for income tax purposes ($4,200.00)
Is this how others would handle this tax situation?