Using home loan from corporation for buying a house

senasena wrote: ↑ Possibly, I have heard opinions they CRA may have issues with non-arm length transactions. Speak to a qualified accountant.

romsan04 wrote: ↑ Hi,

I am single shareholder/employee of my corporation and thinking about taking money out under home loan and putting it as downpayment on a house.
I will be paying back the interest on that loan back to my corporation. Will CRA have any problem with such set up?

trebmember wrote: ↑ Should be ok as long as you charge yourself the current going interest rates and have a proper contract between the corporation and yourself. The corporation would have to file the interest income

trebmember wrote: ↑ Should be ok as long as you charge yourself the current going interest rates and have a proper contract between the corporation and yourself. The corporation would have to file the interest income

senasena wrote: ↑ Number of accountants don't share that view.
https://www.hutcheson.ca/can-i-take-a-h ... rporation/
Generally, owner managed businesses would have a very difficult time taking the “in the capacity of an employee” position for housing loans and the CRA would consider the loan a shareholder loan and include it in your income pursuant to subsection 15(2) of the Income Tax Act.



https://www.fbc.ca/knowledge-centre/cor ... ble-income
It's much more difficult for owner-managers than non-shareholder employees to take advantage of home purchase loans from their companies. Often, CRA will not accept that the owner-manager is receiving the loan because of employment rather than shareholder status, unless loans of this nature are generally available to other unrelated employees of the company, as well.

That's just from the first page of google search.

romsan04 wrote: ↑ Yes I went through the google search and saw these articles.
I am trying to find this on the actual CRA website that would state that the home loan is not available for shareholders. I am having difficulties locating this exact information.

However this link shows that I am available for home loan.
CRA Website

A home-purchase loan is any part of a loan to an employee that the employee used to get or repay another loan to buy a residence. The residence has to be for that employee or a person related to that employee. This also applies to a shareholder or a person related to a shareholder.

RichmondCA wrote: ↑ Hi OP, I've considered something similar in the past and after talking to a number of professionals in my situation it wasn't possible.

I do have to ask, do you have a sizeable amount of cash sitting in your business to do this? Depending on your setup you could liquidate a portion of the business to achieve what you are looking to do and you could qualify for the one time capital gains exemption which i believe is capped at just over 800k.

If you are looking to do this with borrowed money against the company/assets you should read through your terms carefully as you'd be breaching your debt terms. There could be a case to be made for the corp to buy the home.

Every situation is different so no one here can really advise you.

choclover wrote: ↑ I agree with this comment. Having a proper contract that reflects market interest rates (so as not to trigger a taxable benefit unless you are okay with that) and being able to show that you are following the terms of the contract in the event of an audit should allow you to do this. There should be some documentation on the CRA website or on the internet related to shareholder loans that may help fill in the gaps when it comes to details.

kenchau wrote: ↑ Can the corporation buy the home, and you rent from the corporation? Just a random question, I don't know if on a full scale that has any benefits to you from an overall taxation standpoint.

romsan04 wrote: ↑ Not at this time, it is a cottage and I will be using it for personal pleasure.

senasena wrote: ↑ Not a principal residence?

romsan04 wrote: ↑ I think my case is pretty straight forward

RichmondCA wrote: ↑lol

hybridfx2 wrote: ↑ I would do it as a private mortgage with your corporation as the mortgagee and you as the mortgagor, not as a shareholder loan. Do it at market rates and also get an appraisal to ensure you are putting at least 20% down. You would need two sets of lawyers (conflict of interest) and the corporation should hold a lien on the property. Definitely pay more fees this way but it is legit in the eyes of the CRA.* I am not a qualified accountant.