When a shareholder takes out a loan from a corporation, that loan is included in the shareholder's income unless the balance is repaid within one year after the year in which the debt was incurred. If the debt is not repaid within one year, and, as a result, the debt is included in the shareholder's personal income, then there is no imputed interest on the loan. If the debt is repaid within one year, then the debt is not included in the shareholder's personal income, but there is an imputed interest on the loan. Here is an example: Scenario 1: Sam is 100% shareholder of Opco. Sam borrows $100,000 during Opco’s December 31, 2023 tax year. If Sam does not repay the loan to Opco by December 31, 2024: - he entire $100,000 will be included in his 2023 income; and - Sam will need to amend his 2023 personal tax return to include the $100,000 shareholder loan. There is no imputed interest on the loan. Scenario 2: Sam is a 100% shareholder of Opco. Sam borrows $100,000 during Opco’s December 31, 2023 tax year. Opco declares a dividend to Sam of $100,000 on December 31, 2024, and offsets it against the shareholder loan. Sam will not need to include $100,000 in his 2023 personal tax return. Sam will have a taxable benefit equal to $100,000 x [the prescribed interest rate / 365 x # days the loan was outstanding] #Canadiantax #tax #taxtok #canada #taxstrategy #taxplanning #taxadvice #cpa #big4 #pwc #deloitte #kpmg #ey #mnp #tfsa #rrsp #fhsa #business #entrepreneur #smallbusiness