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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 34
Experience:  Tax preparer with 23 years experience, including US/Canada tax returns.
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I have a private corporation, inactive except for an

Customer Question

I have a private corporation, inactive except for an investment account. I am the only shareholder. Over several years I have been withdrawing cash, putting it on the books as a shareholder loan. Can I now clear this multi-year loan by simply declaring a dividend in the loan amount? What would be the journal entry?
Submitted: 9 months ago.
Category: Canada Tax
Expert:  Rick Martin replied 9 months ago.

Hi, I'm happy to answer your question. I'm a CPA with 25 years experience. Yes, as the sole shareholder you may declare a dividend to yourself using the loan to pay yourself instead of cash. The journal entry would be Dr. Retained Earnings and Cr. Loan (instead of Cr. cash). I will keep the question open in case you have any follow on questions. Thank you in advance for a positive rating if you are satisfied with my answer. -Rick

Customer: replied 9 months ago.
Thanks for your reply. I hope your answer is all that I need to do. But, what are my personal income tax considerations? Would I personally be deemed to have received a dividend? Does the corporation need to file any form for dividends paid? Does the company have to issue any form to CRA? What other implications are there?
Expert:  Rick Martin replied 9 months ago.

I'm going to opt out and let another expert answer your other questions. Thank you for this opportunity to try and help. -Rick

Customer: replied 9 months ago.
Thank you. I was hoping for a more complete answer, but I guess I should have asked my question in broader terms. I'll try again. My situation is this. Over the last several years, I have withdrawn cash from my corporation as a shareholder loan. I have not repaid any of these withdrawals. They sit on the balance sheet as a current asset, "Due from directors/shareholders." What are all the steps I now have to take to clear this loan from the company books, satisfy my reporting requirements to CRA, and minimize/avoid personal income tax? What journal entries are required in the company books, and what forms if any to I have to file both personally and corporately? In short, how do I deal with tis problem?