Personal Finance

would i have declare this as income ?

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  • Jun 25th, 2020 6:22 pm
Sr. Member
Sep 29, 2012
792 posts
68 upvotes
Toronto

would i have declare this as income ?

Hello

Last year july i gave my friend $40K from my saving + LOC accounts because he was buying his first property. He told me he will repay 1 year after which i am okay with.
other day he was telling me that he will give me the money back first week of july.
would i be tax for the amount because i already paid tax last year,

how should i go about this transaction ? or is it just okay to put it in my account ?
9 replies
Deal Addict
User avatar
Mar 9, 2012
4104 posts
2980 upvotes
Kitchener
sndeal wrote: Hello

Last year july i gave my friend $40K from my saving + LOC accounts because he was buying his first property. He told me he will repay 1 year after which i am okay with.
other day he was telling me that he will give me the money back first week of july.
would i be tax for the amount because i already paid tax last year,

how should i go about this transaction ? or is it just okay to put it in my account ?
I think you might have to pay tax on any extra money he gave you, on top of the $40G. If it was interest free, there would be no tax. The transaction should be no different than when you lent him the money.
Why can't we all just get along?
Deal Addict
User avatar
Sep 14, 2012
3444 posts
2672 upvotes
Montreal, QC
I'm not a tax lawyer but generally the income tax laws in Canada taxes an individual on the extra money that he/she made and not on the original amount which is already taxed (except when referring to registered accounts/plans). In your case, this would mean that if you charged your friend interest, you would need to declare the interest that your friend paid you.

This means if you lent him $40k and charged him 3% interest ($1,200), you would/should declare the 3% interest ($1,200) that you received from him.

However, if you didn't make any money out of it such as you lent him $40k and also allowed him to use your Line of Credit (and he paid the interest charged to you by the financial institution), I don't see why you would need to declare this as you aren't making any profit.
Deal Addict
User avatar
Aug 10, 2006
2324 posts
1309 upvotes
Hello

Last year july i gave my friend $40K from my saving + LOC accounts because he was buying his first property. He told me he will repay 1 year after which i am okay with.
other day he was telling me that he will give me the money back first week of july.
would i be tax for the amount because i already paid tax last year,

how should i go about this transaction ? or is it just okay to put it in my account ?
Just curious, if your friend didnt pay you back the money, would you declare the lost money as a capital gains /lost on your taxes?
Banned
User avatar
Jul 17, 2008
11042 posts
3878 upvotes
OP, don't forget to declare your $20 you made in a HISA from a bank you barely use, there's no T5 for that. That will pull out this country from the massive debt.
Jr. Member
Mar 3, 2012
161 posts
44 upvotes
Montreal, QC
sndeal wrote: Hello

Last year july i gave my friend $40K from my saving + LOC accounts because he was buying his first property. He told me he will repay 1 year after which i am okay with.
other day he was telling me that he will give me the money back first week of july.
would i be tax for the amount because i already paid tax last year,

how should i go about this transaction ? or is it just okay to put it in my account ?
Hi,

For the exact refund, you don't have anything to do (but keep all records about both transactions if asked later).

As it was been said before, if you received some interest, you have to declare them as interest.


About :
"just curious, if your friend didnt pay you back the money, would you declare the lost money as a capital gains /lost on your taxes?"
As per information Jeff1970 give to us, it's not a business here (it's different if you really work as a lender, of course), no intention to obtain any gain, unfortunately, you can't declare anything but your tears.
Member
Oct 11, 2013
295 posts
161 upvotes
Almost American
Honestly just deposit the principal returned into your bank account via check or wire. If there is an interest payment I would try and get it in cash and just spend it... I get that it could be considered income but for helping your friend out and the Liberal government wants a cut off that to go piss it away on a $1,000,000,000.00 ($1 Billion CAD) gas plant that never happened? mmm, I think you should keep your petty cash and make better decisions with it than they would.
Deal Addict
Nov 6, 2015
1354 posts
1022 upvotes
Guelph, ON
Getting paid back the principal of money you lent is not "income".

Another way to think of it is you gifted him some money, now he is gifting you some. Gifts are not taxed either.
Deal Addict
Jun 26, 2019
2130 posts
1854 upvotes
GTA
wakka2u wrote: Just curious, if your friend didnt pay you back the money, would you declare the lost money as a capital gains /lost on your taxes?
If you wrote it up as a loan, you could claim it as a loss, however if it was a gift, there is nothing to claim, it was freely given.

And as others have said, to address the question at hand, only additional "gains" above the original amount would count as income.
Deal Addict
User avatar
Aug 10, 2006
2324 posts
1309 upvotes
...
And as others have said, to address the question at hand, only additional "gains" above the original amount would count as income.
this is an interesting discussion... i think income (the "gains" anything over what your friend pays back or something monetary value for interest if declared or documented as a loan with interest). If it is a gift, could be subjective as taxable if gift was returned with gift of more money or value .. to me taxable income is generally earned attentionally, like typical bank investment/interest, working for a T4, or just part of the job with tip earnings, etc.. .

adding on taxes to CRA as income would just bring unnecessary attention, like a business where declared extra income generated by "lending money" just sounds like a loan-shark activity or money laundering.

anyways, getting your money back shouldn't be so much work or effort. a tax accountant would be better if your not comfortable with the transaction. Happy you didnt lose a friend over money = )

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