Quick Question. If personal funds are loaned to the corporation. The Corporation has used those funds to earn interest income (via REITS). What are the tax implications? The Owner owns 100% of the shares. The owner is already in the highest tax bracket. Could CRA attribute the revenues back to the owner on the personal side if loan agreement is not done between the owner and the corporation?
Typically, loans from shareholders to their corp are treated as interest free loan advances for use by the corporation as deemed by management. Assuming the funds invested in the REIT’s were in Corp’s name, which would result in the Corp receiving an interest income slip for it to include as Investment Income in the Corp FY end.
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I don’t think there would be much to attribute. Passive income is taxed at the high rate in a corporation. Depending on what province you’re in it’s probably over 50%. Shareholder loans really become a problem when they are the other way around.
Hi Versa. Thanks and agreed.
Thanks Shaun! Agreed! Passive income is to be taxed at 50% passive income, as mentioned by Versa!