Real Estate

Using home loan from corporation for buying a house

  • Last Updated:
  • Oct 6th, 2020 3:52 pm
[OP]
Deal Addict
Mar 22, 2004
3405 posts
846 upvotes
Newuserid wrote: Nothing in tax is straightforward lol. It doesn't matter if you have a T4, the CRA may still conclude that it is not a valid home purchase loan.

Ask yourself this question: if you were to hire someone off the streets to replace your current position as director of the corporation, and you paid him the same compensation, would you be willing to provide this employee the same home purchase loan if they approached you and asked for it?

If your honest answer is yes, then you can claim that you are receiving the home purchase loan as a result of your employment and the loan would be exempt from the normal restrictions.

At the end of day, your not directly breaking any tax laws by giving yourself a home purchase loan - its really a matter of professional opinion. But you have to understand that the CRA may have a different opinion and the tax implications if the CRA disagrees.

You should also ask yourself if this home purchase loan is actually beneficially for you. It may be better for you to just have the bank finance a bigger portion of the home and keep the funds in the corporation.

Another option would be to simply take out a normal shareholder loan which would be subject to the typical shareholder loan rules, which will provide you up to 2 years to repay the loan. If you fail to repay the loan, you can just declare dividends in lieu of the loan repayments.

I recommend that you consult with an accountant before doing anything.
Thank you for putting it in CRA perspective. We are looking at different options. (Shareholder loan)
Member
May 12, 2003
345 posts
220 upvotes
GTA
Yes, that's a shareholder loan. You make no mention of a "repayment" in your original ask, and since most "home purchase" loans are long term, the assumption was that your intention is longer than the typical 1 year end.

You are allowed to take a shareholder loan, and pay interest/deem benefit and keep it on the books for a maximum of 1 year end.
romsan04 wrote: This is wrong, you can get shareholder loan for a two year period but you need pay interest rate back to corporation or include the interest in taxable benefits. Also shareholder loan cannot be in consecutive series. (i.e. cannot take it out, pay it back and then take out again)

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