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Loan is something that is due from the Corporation to the shareholder if that is how it was originally set-up. It is a liability on the books of the Corporation. If it was an asset of the corporation that then corporation loaned you money and it created a receivable on the books of the corporation. If that is set-up of the corporation than the forgiveness would be a taxable item. It also depends on the type of Corporation. If it an S-Corp or LLC, then the retained earnings have already been taxed at the shareholder level and if the loan was given to you then you would be able to deduct the balance and only pay tax on the balance. If the corporation was a C-Corp 1120, then the retained earnings would be considered dividend income to the shareholders and would be taxable when that is distributed. So I need a couple of items to be able to let you know what you can do.
It would be on the tax return filed by the corporation. This would identify the type of corporation it is.
I have not done Canadian controlled private corporation here in the United States, but what I did find is there is a 400,000 lifetime capital gains deduction when the individual disposes of their shares. If you dispose of those shares that loan would become a capital gain to the shareholder and based upon the literature I read you should qualify for this
Did the information I provided about the 400,000 lifetime capital gains deduction help