A shareholder of a corporation borrows money for an income-earning purpose, and the corporation guarantees the loan, which guarantee is secured by a mortgage on corporate-owned property. The shareholder pays a reasonable guarantee fee to the corporation.
The shareholder is entitled to deduct the guarantee fee under 20(1)(e) (subject to 18(9)), the guarantee fee is “normally” business income to the corporation and the shareholder should not be required to report a shareholder benefit in respect of the guarantee.
Question 5, 2022 CTF Conference Roundtable, summarized in Tax Topics no. 2658 (February 14, 2023)
