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Corporation investment as expense for the same financial year
05-23-2018, 10:36 PM
Post: #1
Corporation investment as expense for the same financial year
A small "Canada Corporation A" makes 100K in a financial year (2017-2018), decides to make an investment of 60K in the same financial year. The investment is a loan to another "Ontario Corporation B" at arm's length (owned and operated by completely different, unrelated entities).

Q1: Does "Corporation A" have to first pay taxes on the 100K as if the 100K were retained earnings, -- before it can make the investment loan? Alternatively, is the 60K loan/investment considered/can be a capital expense in some scenarios?
Q2: How much is the minimum interest to be charged for the 60K investment / loan, and where is the reference interest rate to be charged stipulated?
Q3: What is the timeline by which "Corporation A" have to recover the loan?
Q4: In case "Corporation B" fails, or is unable to repay the loan in its entirety, what are the rules to show the loan as a bad investment, and how much taxes have to be paid on the (now lost) investment retroactively? [/align]

Thanks in advance for the answers/suggestions.
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