# Home purchase loan from corporation



## atrp2biz (Sep 22, 2010)

Does anyone have any experience with this? We were previously told that a corporation could not provide a loan for greater than one year, however I was surprised when I saw that one could get a mortgage from a corporation.

http://www.taxtips.ca/personaltax/employees/employeeloans.htm

http://blog.taxresource.ca/employer-loans-to-employees/


----------



## diharv (Apr 19, 2011)

I borrowed $144000.00 from my practice corporation to purchase our current home in Dec 2010. It would have had to have been paid back by my year end Aug 2012 , ie by the end of the year end after the corporate year in which the loan was taken out otherwise it will be taxed as income. You also are supposed to pay a prescribed rate of interest which is around 1% . My corporate accountant took care of things on the tax return so it was pretty simple and after we sold our previous home I paid it back so the loan was for only five months. It is called a shareholder loan. I don't think a mortgage from a corporation is possible however as that would be seen as a taxable benefit or income in the eyes of the CRA.


----------



## Homerhomer (Oct 18, 2010)

diharv said:


> I borrowed $144000.00 from my practice corporation to purchase our current home in Dec 2010. It would have had to have been paid back by my year end Aug 2012 , ie by the end of the year end after the corporate year in which the loan was taken out otherwise it will be taxed as income. You also are supposed to pay a prescribed rate of interest which is around 1% . My corporate accountant took care of things on the tax return so it was pretty simple and after we sold our previous home I paid it back so the loan was for only five months. It is called a shareholder loan. I don't think a mortgage from a corporation is possible however as that would be seen as a taxable benefit or income in the eyes of the CRA.


There are two issues here:

1) Shareholder loan, nothing complicated about it.
2) Mortgage from corporation for house purchase, however it is an employee loan not a shareholder loan, the shareholder has to be an employee of the corporation for this to work. Yes it's possible, no it's not a shareholder loan.


----------



## atrp2biz (Sep 22, 2010)

So since this is for a professional corporation, the shareholder is also an employee. So my understanding is, as long as there are some funds being drawn as salary (as opposed to dividends), this would be viewed as an employee benefit, thus a home purchase loan could be made by the PC to the employee.


----------



## Homerhomer (Oct 18, 2010)

atrp2biz said:


> So since this is for a professional corporation, the shareholder is also an employee. So my understanding is, as long as there are some funds being drawn as salary (as opposed to dividends), this would be viewed as an employee benefit, thus a home purchase loan could be made by the PC to the employee.


Yes, you just need to keep in mind that the loan has to have repayment terms and it actually has to be repaid, and it is for a few specific purchases to be eligible not to be deemed taxable benefits.


----------

