Entrepreneurship & Small Business

Paying salary from corporation that forces a loss

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  • Jun 5th, 2017 9:51 am
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Nov 2, 2013
5697 posts
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Edmonton, AB

Paying salary from corporation that forces a loss

Long story short I need my personal income to be >=$110,000 for 2017 for credit (i.e. investment properties) purposes, to be safe. I both work for another company and own a corporation. I anticipate I will hit around $100,000 for 2017 but may be short $10,000.

My plan is to write myself a salary/bonus for that extra $10,000 (more the better), but this would theoretically force the corporation into a loss for the year. Can I do this? Yes I'll be taxed hard on my personal side, but the opportunity cost of not getting into the investment opportunities would exceed the extra tax I pay. On the bright side, I can carry the loss on the corporation side into future years.

I also have various business expenses I want to put on the corporation side instead of my personal, so I do not drop my Net Income on my personal tax return.
Accountant (Public Practice)
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Deal Addict
Aug 19, 2013
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You can pay yourself whatever salary you want.

You can't just decide to put expenses under the corporation. It doesn't work that way. They expenses have to be directly linked to income earned by the corporation, and paid by the corporation. You don't get to choose. It's either a corporate expense or a personal expense. And if you get caught expensing personal items in the corporation you will be denied the expense in the corporation AND assessed a taxable benefit on your personal return. Resulting in double taxation. So don't try playing that game.
Deal Fanatic
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Nov 2, 2013
5697 posts
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Edmonton, AB
Momof3cuties wrote: You can pay yourself whatever salary you want.

You can't just decide to put expenses under the corporation. It doesn't work that way. They expenses have to be directly linked to income earned by the corporation, and paid by the corporation. You don't get to choose. It's either a corporate expense or a personal expense. And if you get caught expensing personal items in the corporation you will be denied the expense in the corporation AND assessed a taxable benefit on your personal return. Resulting in double taxation. So don't try playing that game.
e.g. Cellphones, where the numbers are the contact numbers for the corp, and work gear, where the employee uses it to earn the corporation income, then corporation pays the employee a salary/bonus. But under the same logic it could be an employment expense on the personal side.
Accountant (Public Practice)
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Jun 25, 2011
336 posts
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Alberta
FirstGear wrote: e.g. Cellphones, where the numbers are the contact numbers for the corp, and work gear, where the employee uses it to earn the corporation income, then corporation pays the employee a salary/bonus. But under the same logic it could be an employment expense on the personal side.
As long as you can prove that the expense has been related to the generation of income and it is reasonable amount then it should be ok. In a business there are some expenses which has personal component in it. CRA says expensing asset has to be substantially related to the business activity, which means 90% or more. if you get audited and you can prove through call log that phone has been primary used in your business activities then you can deduct it. Keep in mind taxation falls under many grey areas. You can only be provide guidance based on your limited description and what the tax rule says but it does not blanket covers all the scenarios. This is why you need to get competent accountant to discuss it further.

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