CRA Shareholder Loan Audit 2025 — Protect Your Corporation, Avoid Double Taxation, and Eliminate CRA Penalties

In 2025, CRA’s Shareholder Loan Audit Program is targeting small businesses and professional corporations across Canada. CRA’s automated systems now compare shareholder transactions, retained earnings, and dividends to identify unreported benefits or improper withdrawals. Even legitimate short-term advances or reimbursed expenses can be reclassified as shareholder income if not properly documented. These audits often result in double taxation — once to the corporation and again to the shareholder — along with 50% gross negligence penalties. At Mackisen CPA Auditors Montreal, we defend corporations and shareholders against CRA’s aggressive loan reassessments. Our CPA auditors and tax lawyers review your books, correct documentation, and build a strong legal argument that protects your corporate structure and eliminates penalties. We don’t let CRA mislabel your transactions — we defend your intent and your integrity.

Legal and Regulatory Framework

Income Tax Act (Canada)

• Section 15(2): Treats shareholder loans as income unless repaid or proven to be legitimate advances.

• Section 80.4(2): Imposes deemed interest benefits on low or interest-free shareholder loans.

• Section 20(1)(j): Allows deduction for bad debts or loan write-offs under proper conditions.

• Section 163(2): Applies gross negligence penalties that Mackisen can contest and remove.

• Section 220(3.1): Enables CRA to cancel penalties and interest through the Taxpayer Relief Program.
  Tax Administration Act (Quebec)
  Revenu Québec mirrors CRA’s shareholder loan audit process for provincial corporate tax. Mackisen ensures unified federal and provincial defense.

Key Court Decisions

Bédard v. The Queen (2022): CRA must prove that shareholder loans were not business-related before reclassifying them as income.
Thibault v. The Queen (2022): Proper documentation of repayment plans protects taxpayers from reassessment.
Guindon v. Canada (2015): Penalties cannot apply when transactions are recorded in good faith and follow professional advice.
Jordan v. The Queen (2009): CRA cannot assume benefit without evidence of personal use or intent.
These rulings confirm that CRA shareholder loan audits can be successfully defended with proper documentation and expert advocacy.

Why CRA Targets Shareholder Loans

CRA focuses on shareholder loans because they’re often misunderstood or misreported in small corporations. Common 2025 triggers include:

• Withdrawals recorded as loans but not repaid within one year.

• Personal expenses charged to the corporation.

• Lack of formal shareholder loan agreements.

• Misclassification of dividends, reimbursements, or bonuses.

• Director advances without supporting documentation.
  CRA assumes personal benefit — Mackisen proves legitimate business purpose.

Mackisen’s Shareholder Loan Audit Defense Strategy

1. Audit Review: Analyze CRA’s audit notice and pinpoint misinterpretations in loan or dividend treatment.

2. Loan Reconciliation: Rebuild shareholder loan ledgers and repayment schedules to demonstrate compliance.

3. Documentation Correction: Draft or update shareholder agreements and resolutions for audit defense.

4. Formal Objection & Negotiation: File a Notice of Objection to suspend CRA collections and challenge their findings.

5. Penalty & Interest Relief: Apply under Section 220(3.1) to eliminate financial penalties and restore fairness.
   Our defense ensures CRA understands your corporate transactions and respects the difference between income and temporary financing.

Real Client Experience

A Montreal medical professional was reassessed $186,000 after CRA claimed shareholder withdrawals were income. Mackisen proved loan repayment and reversed the entire reassessment.
A Quebec family corporation was audited for “unreported shareholder benefits.” Mackisen reconstructed ledgers, submitted resolutions, and achieved full penalty cancellation.

Common Questions

Can CRA tax shareholder loans as income? Yes, if not repaid or properly documented — but Mackisen ensures CRA recognizes legitimate transactions.
How long do I have to repay a shareholder loan? Within one year after the corporation’s fiscal year-end to avoid inclusion in income.
Can CRA audit both shareholder and corporate returns? Yes, but Mackisen manages both files to ensure consistent and coordinated defense.
What if my accountant misclassified the transactions? Mackisen can correct filings and request penalty relief for good faith errors.

Why Mackisen

At Mackisen CPA Auditors Montreal, we defend corporations and shareholders with precision, professionalism, and integrity. Our CPA auditors and tax lawyers understand how to present shareholder transactions accurately and persuasively, protecting you from CRA’s overreach. We act fast, document clearly, and negotiate powerfully — because every transaction has a story worth defending. When CRA audits your shareholder loans, Mackisen audits their assumptions.
Call Mackisen CPA Auditors Montreal today for your 2025 Shareholder Loan Audit Defense Consultation. The first meeting is free, and your protection starts immediately.