Nearly every Canadian private corporation has a shareholder loan account. Very few owners could say what the balance is, when each amount in it arose, or what happens if it is still there in eighteen months.
Key Takeaway
Subsection 15(2) of the Income Tax Act includes in a shareholder's income the full amount of a loan from the corporation, not a benefit measured on it. Subsection 15(2.6) excepts a loan repaid within one year after the end of the corporation's taxation year in which it was made, provided the repayment is not part of a series of loans and repayments. Separately, subsection 80.4(2) deems a benefit equal to interest at the prescribed rate less interest actually paid, reported at 3 percent for the second quarter of 2026. On our own figures, a $200,000 loan produces roughly $100,000 of tax under 15(2) at a 50 percent rate against roughly $3,000 under 80.4, a ratio of about thirty-three to one. Paragraph 20(1)(j) allows a deduction when a previously included loan is repaid, which makes the exposure a timing problem rather than a permanent one, but the timing is where the damage sits.
A Note On Currency
Everything here is stated as verified in August 2026 and requires confirmation before reliance. The prescribed rate changes quarterly.
We have not verified any statutory provision against the Act, and subsection references are as commentary cites them. We have not read Canada Trustco Mortgage Co v The Queen, which is described here from a secondary account.
One source we rely on carries its own notice that it provides information of a general nature, is current only at its posting date and is not updated[1], and its posting date is some years ago. We flag where it is used.
This is not tax advice. A shareholder loan question turns on the specific movements in an account across specific dates, and an owner with a material balance should have it reviewed rather than act on a general description.
The Provision
What subsection 15(2) does, and the feature that makes it severe.
Commentary describes it as pertaining to the direct loan of money by a corporation to its shareholder and the inclusion of such loan in the income of the shareholder[1].
Another states that withdrawals from corporations by non-corporate shareholders, and by taxpayers connected with such shareholders, must be included in the recipient's income where the withdrawal is characterised as a shareholder loan[2].
A third puts the consequence plainly: the full amount of the loan or debt gets added to your personal taxable income[3].
That is the point most owners have not registered, and this is our own emphasis.
This is not a benefit provision. It does not tax the advantage of having the money, or the interest saved, or a notional rent on the funds.
It puts the entire principal into income, as though the corporation had simply paid it out.
Note also the breadth of who is caught. The reference to taxpayers connected with shareholders[2] means a loan to a shareholder's family member can raise the same question, which owners frequently do not anticipate when a corporation advances money to a spouse or an adult child.
Why It Exists
The rationale, stated by commentary with unusual directness.
It says: in the absence of subsection 15(2), individuals would take loans rather than income to avoid paying income tax[2].
That is the whole design in a sentence, and it explains why the provision is drafted as harshly as it is, which is our own analysis.
An owner-manager controls both parties to the transaction. They decide what the corporation pays them and in what form, and they can characterise a withdrawal as salary, as a dividend, or as a loan.
The first two are taxable. The third, absent a rule, would not be, and there would be no commercial force compelling repayment because the lender is controlled by the borrower.
So a rule is needed, and the rule chosen is not a modest anti-avoidance provision. It taxes the whole amount unless an exception applies.
Understanding that logic is practically useful, because it tells an owner what the provision is testing for: whether the money has genuinely been lent and will genuinely come back, or whether it has simply left the corporation under a label.
Every exception and every anti-avoidance rule discussed below is directed at that same question.
How Loan Accounts Actually Arise
The practical origin, which is not what the word "loan" suggests. This section builds on a commentary observation.
Commentary notes that most exposure is created by routine bookkeeping, giving personal expenses on the corporate card as its example[4].
That is exactly right and it changes how the risk should be understood, which is our own analysis.
Almost nobody sits down and decides to borrow from their company. What happens is smaller and continuous.
A personal purchase on the company card. A family trip booked through the business account because the details were saved there. A home repair paid by the corporation because the contractor was already being paid for work at the premises. Personal tax instalments paid from corporate funds. A vehicle, a piece of furniture, a tuition payment.
Each is coded to the shareholder loan account by the bookkeeper, correctly, and each is small.
By year end the account has a balance that nobody decided on, arising from dozens of transactions across twelve months, and the owner discovers it at the same time as the financial statements.
Two consequences follow.
The balance is frequently larger than expected, because it accumulated rather than being drawn.
And the individual dates matter, as the sections below explain, but nobody was tracking them because nobody thought of these transactions as loans when they happened.
Thirty-Three To One
The comparison between the two provisions, computed by us at an assumed 50 percent marginal rate.
Take a $200,000 shareholder loan balance.
Under subsection 15(2), the income inclusion is the full $200,000, producing tax of roughly $100,000.
Under subsection 80.4(2), at the prescribed rate reported as 3 percent for the second quarter of 2026[4], the deemed benefit is $6,000, producing tax of roughly $3,000.
The ratio is approximately thirty-three to one.
We would draw the practical conclusion sharply, because it runs against how owners think about this area.
Imputed interest is the concept owners have heard of. It is discussed at year-end meetings, it produces a small number on a return, and it feels like the thing to manage.
It is a rounding error next to the other provision.
Commentary makes a related observation from the other direction, noting that the deemed interest benefit is a relatively smaller tax issue than the subsection 15(2) inclusion, but it is separate and additive[4].
Both are worth managing. Only one of them can produce a six-figure assessment on a mid-sized private company.
The Inclusion Is Retroactive
When the tax arises, which is not when it is discovered.
Commentary states that the inclusion is retroactive to the year the loan was taken, and gives the mechanics: if CRA finds in 2025 that you had a shareholder loan in 2024, it will reassess the 2024 return to include it[3].
Another describes the consequences of running afoul of the provisions as harsh and retroactive[2].
Three consequences follow, ours.
Interest runs from the original due date, not from the date of discovery. This publication has made the same observation about timing disputes generally, and it applies with force here because loan accounts persist for years.
The applicable marginal rate is the rate for the original year, which may be higher or lower than the current one and is outside the owner's control.
And an assessment can reach several years at once, since a loan account that has been outstanding since 2021 raises the question in each year it was outstanding.
That combination, a large principal inclusion applied to old years with interest, is what makes this provision one of the more damaging in ordinary owner-manager practice.
The One Year Rule
The exception that saves most balances, and its two limbs.
Commentary states that subsection 15(2.6) provides that if a shareholder loan is repaid within one year after the end of the taxation year of the lender corporation in which the loan was made, and as long as the repayment was not part of a series of transactions or loan repayments, subsection 15(2) does not apply and the loan is not included in the borrower's income[1].
Another states the same rule and adds that if the loan is repaid within that period it will not be included in income during the time that the loan was outstanding[2].
Note that the exception has two limbs and both must hold, which is our own emphasis.
There is a timing requirement, being repayment within the stated period.
And there is a character requirement, being that the repayment must not form part of a series of loans and repayments.
An owner who repays on time has satisfied one of them. Whether they have satisfied the other depends on the pattern of the account over several years, which is the subject of the sections below and which is where most disputes in this area arise.
The Window Is Not One Year
A practical point about the deadline that is worth understanding precisely. This section is our own analysis of the rule as reported.
The period runs to one year after the end of the corporation's taxation year in which the loan was made[1]. It does not run one year from the loan.
Commentary elsewhere describes it as repaying within two corporate year ends[2], which is the same rule expressed the other way round.
The consequence is that the available window depends heavily on when in the corporate year the money was taken.
On a 31 December year end, our own working: money taken on 2 January falls in the year ending that 31 December, so the deadline is 31 December of the following year, giving roughly 24 months.
Money taken on 30 June gives roughly 18 months.
Money taken on 28 December gives roughly 12 months.
So the same rule produces a window that varies by a factor of two on borrowing date alone.
Two practical points. An owner planning a substantial withdrawal has a real interest in the timing of it relative to the corporate year end. And an owner reviewing an existing account cannot apply a single deadline to the whole balance, because different amounts in it were taken in different years and carry different deadlines.
Commentary illustrates that second point with a worked example of a professional corporation, noting that the loan there was made just after a July year end and so carried a deadline nearly two years out[2].
A Series Of Loans And Repayments
The second limb, which defeats the arrangement most owners actually operate.
Commentary states that CRA frequently recharacterises the repayment as part of a pre-arranged series of transactions designed to avoid income inclusion, even where the arrangement appears on its face to comply with the one-year repayment rule[5].
Another states that temporary repayments that are part of a prearranged series of loans and repayments may still be subject to subsection 15(2), and that temporary repayments which are re-borrowed shortly thereafter may trigger inclusion[6].
The reason this matters so much, and this is our own analysis, is that repaying and re-borrowing is the natural behaviour the rule was written to catch.
An owner whose loan account is approaching its deadline faces a real cash problem. The money has been spent, and finding the principal to repay it is difficult.
The obvious solution is to borrow from somewhere for a short period, repay the corporation, and then draw again once the deadline has passed. That satisfies the timing limb perfectly.
It is also, on the face of it, exactly what the character limb excludes.
So the manoeuvre that the deadline invites is the manoeuvre the second condition is designed to defeat, which is why an owner needs to understand both limbs rather than diarising the date.
What A Series Means
The test, from the authority commentary cites.
It states that in Canada Trustco Mortgage Co v The Queen the Supreme Court of Canada explained that a series of transactions involved a number of transactions that are preordained in order to produce a given result[1].
We report that formulation as commentary quotes it, not having read the judgment.
The operative word is preordained, and this is our own reading of what it implies.
The question is not whether a repayment was followed by a new loan. Owners take money from their corporations repeatedly over decades, and a pattern of drawing and clearing is not by itself preordination.
The question is whether the transactions were arranged in advance to produce the result, which is to say whether the repayment was made with the intention of re-borrowing.
That places weight on evidence of intention and on the surrounding circumstances: how the repayment was funded, how quickly the funds went back out, whether anything in the owner's actual financial position changed, and whether the pattern repeats.
Commentary describing CRA's approach captures the same idea from the assessing side, referring to arrangements that suggest temporary repayment or circular fund movement[5].
Circular is the right word. Money that leaves the corporation, comes back briefly, and leaves again has not gone anywhere.
The Pattern That Fails
A worked illustration from commentary, which shows how far back the consequence reaches.
It describes a situation where a loan from August 2025 remains outstanding with its own deadline a year later, and the owner then borrows $200,000 again on 5 July 2026. It states that CRA will consider that pattern a series of loans and repayments and disallow the exception for the earlier loans, resulting in CRA going back and reassessing those years. It concludes that the dates and the pattern both matter and must be defensible[4].
Two features of that outcome deserve emphasis and this is our own analysis.
The consequence attaches to the earlier loans. A new borrowing in 2026 does not merely create a fresh exposure; it retrospectively removes the exception that had protected the prior year.
So an owner who repaid on time and believed the matter closed can have that year reopened by something they did afterwards.
And the trigger is a pattern, which means the analysis is conducted across years rather than within one. An account reviewed one year at a time will not reveal it; an account reviewed as a continuity schedule will.
That is a strong argument for maintaining a multi-year view of the loan account, showing every advance and every repayment with dates, rather than only a year-end balance.
It is also an argument for caution before drawing again shortly after clearing a balance, which is precisely when it feels safest.
What A Genuine Repayment Looks Like
The positive test, drawn from commentary.
One source states that effective compliance requires that repayment be genuine, permanent, and supported by a demonstrable change in the shareholder's financial position[5].
Another gives a concrete example of a valid repayment: shareholders transferring personal assets to the corporation to settle the loan, contrasted with an invalid repayment being a series of transactions designed to avoid tax liability[6].
The phrase about a demonstrable change in financial position is the useful one, and this is our own reading.
It gives an owner a question to ask about any proposed repayment: after this, am I actually poorer and is the corporation actually richer, in a way that persists?
Repaying from personal savings changes the position. Transferring a real asset changes the position. Declaring and paying a dividend or salary and applying it against the balance changes the position, because tax has been paid on the amount.
Borrowing personally to repay the corporation, then drawing again once the year has turned, does not change the position at all. At the end of it the owner owes the same money to the same company.
That framing is more useful than a rule, because it can be applied to arrangements nobody has written a rule about.
Entries That Do Not Correspond To Activity
A specific failure mode identified by commentary, and it concerns bookkeeping rather than cash.
It lists among problems reliance on accounting entries that do not correspond with actual financial activity[5].
This is the version of the problem we would expect to see most often in practice, and this is our own analysis.
At a year-end close, a shareholder loan balance is frequently cleared by journal entry. A bonus is accrued and offset. A dividend is declared and applied. Amounts are reclassified between accounts. The balance disappears from the statements.
Whether that constitutes repayment depends entirely on whether something real happened, and the entry itself does not establish that.
Commentary notes that CRA regards what constitutes a repayment as a question of facts decided on a case-by-case basis[1].
Two practical implications.
A bonus or dividend used to clear a loan account needs the ordinary indicia of having been declared and dealt with: a resolution, the correct date, the associated withholdings or slips, and reporting in the recipient's income.
And the timing of the entry matters against the deadline. An entry made during the year-end close, months after the corporate year end, may bear a date within the year while having been made afterwards, and the distinction is one an examiner can identify from the accounting records themselves.
How It Is Usually Cleared
The reality of practice, described candidly by commentary.
It states that funds borrowed are seldom repaid to the corporation, and that repayment typically occurs by the corporation declaring a salary or dividend sufficient to eliminate the borrowed amount, which is then reported as income to the borrower with personal tax paid as a result[2].
Commentary elsewhere makes the same point about the eventual outcome, noting that the amount of the loan effectively becomes taxable income as a dividend or salary, which is what would have happened anyway, but formalised[3].
That is worth sitting with, because it reframes the whole exercise, and this is our own analysis.
For most owner-managers the shareholder loan is not a financing arrangement at all. It is compensation taken during the year and characterised at the end of it.
Understood that way, the loan account is a deferral of the decision about how the owner is paid, and the one-year rule is the outer limit of how long that decision can be deferred.
The practical consequence is that the answer for most owners is not to find a way to keep the loan outstanding. It is to declare the compensation, in whichever form the numbers favour, before the deadline.
That produces the tax that was always going to arise, at a time of the owner's choosing, with the form of payment optimised, rather than a full principal inclusion at whatever rate applied in an old year.
The alternative, which this series has seen in other contexts, is having the outcome chosen by someone else later.
The Deduction On Repayment
The relief that exists even after an inclusion, and it is frequently overlooked.
Commentary states that paragraph 20(1)(j) provides that when a shareholder repays part or all of a loan that was included in income under subsection 15(2), the repayment amount is deductible in calculating the shareholder's income for the year in which the repayment was made[1].
Another puts it more pointedly: repayment is not wasted even after an inclusion, and anyone carrying an old 15(2) inclusion should get advice before writing the balance off as a sunk cost[3].
That second observation is genuinely valuable and this is our own reading of why.
An owner who has been assessed under subsection 15(2) has paid tax on an amount they still owe the corporation. The natural conclusion is that the money is gone twice over and there is no point repaying.
That conclusion is wrong. Repaying produces a deduction, so the earlier inclusion is recoverable in the year of repayment.
Commentary also notes that repayments must be genuine and well documented to ensure compliance[6], so the same standards apply to a repayment claimed under this paragraph as to one claimed under the one-year exception.
Anyone in this position should take advice before deciding what to do with the balance, because the decision is not obvious and the amounts are usually large.
The Timing Mismatch
Why the availability of a deduction does not make the inclusion harmless. This section is our own analysis.
The inclusion arises in the year the loan was made. The deduction arises in the year of repayment. Those may be several years apart.
Four things go wrong in the interval.
Cash. On our earlier illustration, tax of roughly $100,000 is payable in respect of the earlier year, and the offsetting relief arrives whenever repayment occurs. The owner must fund the gap.
Interest. It runs on the year-one tax from its original due date, and the later deduction does not undo it.
Rate differences. The inclusion is taxed at the rate of the earlier year and the deduction is claimed at the rate of the later one. Where the owner's income has fallen in the interval, which is common after a business setback, the deduction is worth less than the inclusion cost.
Absorption. A deduction is only useful against income. An owner with a large deduction and little income in the repayment year may not be able to use it fully in that year.
So the accurate description is that subsection 15(2) creates a timing problem rather than a permanent loss, and that the timing problem is expensive.
That is a more precise statement than either of the two things owners usually believe: that the money is lost entirely, or that it does not matter because it comes back.
The Second, Separate Benefit
The imputed interest rule, which applies even where everything else is right.
Commentary states that even where subsection 15(2) does not apply, subsection 80.4 may impose a separate taxable benefit, and that where a corporation provides a loan at an interest rate below the prescribed rate, or no interest at all, the shareholder may be deemed to have received a benefit equal to the foregone interest[5].
Another states that under subsection 80.4(2) a shareholder receiving a low-interest or interest-free loan is deemed to have received a benefit equal to the difference between interest at the prescribed rate and the interest actually paid, and gives the worked figure: a $200,000 interest-free shareholder loan outstanding for a full year produces a deemed benefit of $6,000 at a prescribed rate reported as 3 percent for the second quarter of 2026[4].
It adds that even a perfectly compliant shareholder loan creates a taxable benefit if it is interest-free or below-market, and that owners sometimes assume that because a loan is otherwise compliant no tax consequences attach, which is not true[4].
Two points, ours.
The rate is prescribed and changes quarterly, so the figure must be computed for the periods concerned rather than annually at a single rate.
And the benefit applies to the outstanding balance over time, which means an account that is cleared and redrawn during a year still generates a benefit for the periods it was outstanding.
The Thirty Day Answer
The straightforward way to eliminate the second benefit.
Commentary states that if the shareholder pays interest to the corporation at the prescribed rate or higher, and pays it within 30 days of year end, the deemed benefit is generally eliminated, with the corporation then including that interest in its income[4].
Another describes the benefit as reduced by any interest actually paid by January 30 of the following year[3].
Those two formulations are consistent for a calendar year, which is our own observation, and an owner should confirm which year end the deadline runs from in their own case.
Three practical points, ours.
The payment must be actually made, not accrued. This is the same failure mode described earlier: an entry recorded at the year-end close, months later, is not a payment made within thirty days of the year end.
The corporation includes the interest in its income, so the arrangement is not free. It converts a personal benefit inclusion into corporate income, and commentary notes the net effect depends on the structure[4].
And the amount is small relative to the other provision. An owner who has organised the thirty-day interest payment and left a large balance outstanding past its deadline has solved the $3,000 problem and left the $100,000 one, on our earlier figures.
The Purpose Exceptions
The routes by which a loan can remain outstanding without inclusion.
Commentary describes exceptions under subsections 15(2.2) through 15(2.6), and sets out the requirements for one of them: the borrower is a shareholder and an employee of the corporation, or the spouse or common-law partner of an employee; the loan is for one of certain purposes, being acquiring a dwelling for personal use, acquiring shares of the corporation or a related corporation, or purchasing a motor vehicle for employment-related duties; the loan is made because of the individual's employment rather than their shareholding; and bona fide repayment arrangements are made within a reasonable time[6].
It also refers to loans made in the ordinary course of the corporation's business with reasonable repayment terms being excluded under subsection 15(2.3)[6].
Another describes the most common exception as being for loans to employees who happen to be shareholders, for specific purposes[3].
Three observations, ours.
The purposes are narrow and enumerated. General personal spending is not among them, which is what most loan accounts actually consist of.
The conditions are cumulative, so a home purchase loan to a shareholder who is not an employee does not qualify, and neither does one made without bona fide repayment arrangements.
And bona fide repayment arrangements mean documented terms, which is where these exceptions are most often lost. An advance made for a qualifying purpose with nothing written down has not established the condition.
Because Of Employment, Not Shareholding
The condition that does most of the work in the exceptions, and it is a question of characterisation. This section is our own analysis.
The requirement is that the loan be made because of the individual's employment rather than their shareholding[6].
For an owner-manager who is both, that is a genuinely difficult test, because the same person occupies both capacities and the corporation's decision was made by them.
The usual evidence is comparative: would the corporation have made this loan, on these terms, to an employee who was not a shareholder.
Where a corporation has a policy applying to a class of employees, and the owner-manager's loan is on the same terms as loans made to others, the answer is reasonably clear.
Where the corporation has one employee-shareholder and no policy, the comparison has no content and the characterisation rests on assertion.
This is the same difficulty this series identified in the automobile benefit article, where an owner-manager's position is weaker precisely because the arm's length counterparty who would normally supply independent evidence does not exist.
The practical response is the same: document the arrangement as it would be documented between strangers, with terms, security where appropriate, a repayment schedule and a record of the decision, before the money moves.
What The Auditor Actually Examines
The enquiry in practice. This section is our own analysis.
The shareholder loan account continuity across several years, showing every advance and repayment with dates, which is where a pattern becomes visible.
Balances outstanding past the applicable deadline, computed by reference to the year each amount was advanced rather than to a single date.
Repayments followed by fresh advances, and the interval between them.
How each repayment was funded, and whether the owner's financial position changed as a result.
Journal entries clearing the account, tested against whether corresponding real activity occurred and when the entry was actually made.
Bonuses and dividends applied against the account, tested for resolutions, dates, withholdings and reporting.
Interest paid, and whether it was actually paid within the applicable window rather than accrued.
Any exception relied on, tested against the cumulative conditions, particularly documented repayment arrangements and the employment characterisation.
The first item is the one owners are least prepared for. A single year's balance tells you little; the continuity across five years tells you almost everything.
What Records Survive
A multi-year continuity schedule of the loan account, with dates and amounts for every movement, maintained rather than reconstructed.
A deadline attached to each advance, computed from the corporate year end in which it was made.
Evidence of how each repayment was funded, showing the source of the money.
Resolutions and supporting documents for any bonus or dividend used to clear the balance, dated and matched to withholdings and slips.
Proof of actual interest payments, with dates, where the thirty-day route is used.
A written loan agreement where an exception is relied on, with repayment terms established before the advance.
Evidence supporting the employment characterisation, including any policy applying to other employees.
A record of what each advance was for, since the enumerated purposes are narrow and the classification cannot be reconstructed later.
What To Do
Find out what the balance is and when each part of it arose. Most owners know neither, and the second question is the one that sets the deadlines.
Compute a deadline per advance, not one for the account. The window runs from the corporate year end in which the amount was taken, so different amounts expire on different dates.
Understand which provision matters. On our figures the 15(2) inclusion carries roughly thirty-three times the tax of the imputed interest benefit.
Do not repay in order to re-borrow. That is the pattern the second limb of the exception exists to defeat, and commentary reports it can reopen earlier years that were previously fine.
Ask whether the repayment changes your financial position. Genuine, permanent and demonstrable is the standard commentary describes, and circular movement fails it.
Make journal entries correspond to real activity. A bonus or dividend clearing the account needs a resolution, the right date, and the associated withholdings and reporting.
Treat the account as a deferred compensation decision. For most owners it is, and declaring the salary or dividend before the deadline gives the same tax at a time and in a form of your choosing.
If you have already been assessed, take advice before writing the balance off. Paragraph 20(1)(j) gives a deduction on repayment, so an old inclusion is not necessarily a sunk cost.
Pay the prescribed-rate interest, in cash, within thirty days of year end if you are relying on that route, rather than accruing it at the close.
Watch advances to family members. The provision reaches taxpayers connected with shareholders, which owners rarely anticipate.
The Limits Of This Analysis
Several caveats matter. This is not tax advice; a shareholder loan question turns on specific movements across specific dates and a material balance should be reviewed professionally. Everything is stated as verified in August 2026 and requires confirmation; the prescribed rate changes quarterly and the 3 percent figure reported here relates to one quarter of 2026. We have not verified any statutory provision against the Act and subsection references are as commentary cites them. We have not read Canada Trustco Mortgage Co v The Queen and describe the series formulation from a secondary account. One source relied on carries its own notice that it is current only at its posting date and is not updated. We did not obtain the full list of exceptions under subsections 15(2.2) to 15(2.6), the detailed conditions of the ordinary course of business exception, or the requirements for bona fide repayment arrangements. We have not addressed how the provision applies where the shareholder is a corporation, or the interaction with the rules governing loans between related corporations. All arithmetic is our own, applies an assumed marginal rate and the reported prescribed rate to hypothetical figures, and is illustrative only; the window illustration assumes a 31 December corporate year end. The characterisation of loan accounts as accumulated bookkeeping, the framing of the account as a deferred compensation decision, the four-part analysis of the timing mismatch, the observation about the absent arm's length comparator and the audit examination structure are our own. This article does not address subsection 15(1) shareholder benefits generally, the treatment of loans forgiven or written off, section 80 debt forgiveness, or the interaction with the tax on split income.
Frequently Asked Questions
What does subsection 15(2) actually tax?
How long do I have to repay?
Can I repay before the deadline and borrow again after?
Which is the bigger problem, the inclusion or the imputed interest?
We were already assessed. Is repaying pointless now?
What is the practical answer for most owners?
References
- Rotfleisch & Samulovitch PC. Tax Treatment of Shareholder Loans Under Subsection 15(2), on subsection 15(2) pertaining to the direct loan of money by a corporation to its shareholder and the inclusion of such loan in the shareholder's income; on subsection 15(2.6) providing that if a shareholder loan is repaid within one year after the end of the taxation year of the lender corporation and the repayment was not part of a series of transactions or loan repayments, subsection 15(2) does not apply; on the Supreme Court of Canada in Canada Trustco Mortgage Co v The Queen explaining that a series of transactions involved a number of transactions that are preordained in order to produce a given result; on paragraph 20(1)(j) providing that where a shareholder repays part or all of a loan included in income under subsection 15(2), the repayment amount is deductible in calculating income for the year in which the repayment was made; and on CRA regarding what constitutes a repayment as a question of facts decided on a case-by-case basis. Note: a Canadian tax law firm publication carrying its own notice that it provides information of a general nature, is current only at its posting date and is not updated; we have not read the judgment cited. taxpage.com
- Tucker Professional Corporation. The Taxation of Shareholder Loans, on withdrawals from corporations by non-corporate shareholders and taxpayers connected with such shareholders being required to be included in the recipient's income where characterised as a shareholder loan; on the rationale that in the absence of subsection 15(2) individuals would take loans rather than income to avoid paying income tax; on subsection 15(2.6) moderating the general rule where the loan is repaid within one year from the end of the taxation year of the corporation in which the loan was made; on the consequences of running afoul of the provisions being harsh and retroactive, and repaying within two corporate year ends being a reliable way of avoiding the provision; on a worked example in which a professional corporation's loan made shortly after a July year end carried a deadline nearly two years out; and on funds borrowed being seldom repaid, with repayment typically occurring by the corporation declaring a salary or dividend sufficient to eliminate the borrowed amount. Note: a Canadian professional corporation publication. tuckerspc.ca
- Taxpayer Law. (2026, January). Shareholder Loans and Subsection 15(2): What Canadian Business Owners Need to Know, on the full amount of the loan or debt being added to personal taxable income; on the inclusion being retroactive to the year the loan was taken, with CRA reassessing the earlier return; on repayment not being wasted even after an inclusion, since a loan taxed under subsection 15(2) that is later repaid can generally be deducted under paragraph 20(1)(j), and on anyone carrying an old inclusion getting advice before writing the balance off as a sunk cost; on a deemed interest benefit under subsection 80.4(2) applying at the prescribed rate on the outstanding balance, reduced by any interest actually paid by January 30 of the following year; on the most common exception being for loans to employees who happen to be shareholders for specific purposes; and on the amount of the loan effectively becoming taxable income as a dividend or salary, which is what would have happened anyway but formalised. Note: a Canadian tax law publication. taxpayer.law
- ConnectCPA. (2026, May). Shareholder Loans, the One-Year Rule, and the Subsection 15(2) Trap, on most exposure being created by routine bookkeeping, with personal expenses on the corporate card given as an example; on a worked pattern in which a loan from August 2025 remains outstanding and a further $200,000 is borrowed on 5 July 2026, which CRA will consider a series of loans and repayments, disallowing the exception for the earlier loans and reassessing those years, with the conclusion that the dates and the pattern both matter and must be defensible; on the section 80.4 deemed interest benefit applying separately, so that a compliant shareholder loan still produces a taxable benefit if interest-free, at 3 percent of the balance per year on the second quarter 2026 prescribed rate; on a $200,000 interest-free loan outstanding for a full year producing a deemed benefit of $6,000; on that being a relatively smaller tax issue than the subsection 15(2) inclusion but separate and additive; and on the deemed benefit generally being eliminated where the shareholder pays interest at the prescribed rate or higher within 30 days of year end, with the corporation then including that interest in its income. Note: a professional accounting publication; the prescribed rate changes quarterly. connectcpa.ca
- Rotfleisch & Samulovitch PC. (2025). CRA Shareholder Loan Rules in Canada: Subsection 15(2) and More, on CRA frequently recharacterising a repayment as part of a pre-arranged series of transactions designed to avoid income inclusion, even where the arrangement appears on its face to comply with the one-year repayment rule; on reliance on accounting entries that do not correspond with actual financial activity being among the problems identified; on effective compliance requiring that repayment be genuine, permanent, and supported by a demonstrable change in the shareholder's financial position; on any arrangement suggesting temporary repayment or circular fund movement facing significant scrutiny in a CRA shareholder loan audit; and on subsection 80.4 imposing a separate taxable benefit where a corporation provides a loan at below the prescribed rate or interest-free, with the shareholder deemed to have received a benefit equal to the foregone interest. Note: a Canadian tax law firm publication. taxpage.com
- Tax Partners. Shareholder Loans: Tax Implications and Compliance, on exceptions under subsections 15(2.2) through 15(2.6) that may prevent inclusion; on the conditions for one exception being that the borrower is a shareholder and an employee of the corporation or the spouse or common-law partner of an employee, that the loan is for acquiring a dwelling for personal use, acquiring shares of the corporation or a related corporation, or purchasing a motor vehicle for employment-related duties, that the loan is made because of the individual's employment rather than their shareholding, and that bona fide repayment arrangements are made within a reasonable time; on loans made in the ordinary course of the corporation's business with reasonable repayment terms being excluded under subsection 15(2.3); on repayments under paragraph 20(1)(j) needing to be genuine and well documented; on temporary repayments that are part of a prearranged series of loans and repayments potentially remaining subject to subsection 15(2); on a valid repayment example being shareholders transferring personal assets to the corporation to settle the loan, contrasted with an invalid repayment being a series of transactions designed to avoid tax liability; and on ensuring loan agreements include clear repayment terms and timelines documented by written agreements or corporate resolutions. Note: a professional accounting publication; we did not obtain the full list of exceptions. taxpartners.ca
This article is provided for general informational purposes and is not tax advice. Statutory provisions have not been verified against the Act and subsection references are as commentary cites them. The prescribed rate changes quarterly and the figure reported here relates to one quarter of 2026. The authors have not read the judgment described, and one source relied on carries its own notice that it is not updated. All arithmetic is the authors' own and is illustrative only.