Shareholder-Employee Loan or Benefit

Shareholder-Employee Loan or Benefit

Where the shareholder is also an employee, following types of loans are not taxable and excluded from income:

– a loan to employee who is not a specified employee of the lender
– where the purpose of the loan is to buy a principal residence
– where the purpose of the loan is to buy a car for use in his or her employment
– where the purpose of the loan is to buy previously un-issued shares directly from the corporation

The loan must also be repaid within a reasonable time. It is also important to note that loan must be made because of the individual’s employment and not because of shareholder of the corporation.