Shareholder Loans & U.S. Taxes

Canada treats Shareholder Loans as taxable to the shareholder only if it hasn't been paid back within one year.    

​The US doesn't have such a rule and may assess Shareholder Loans as Constructive Dividends.   This would mean that the taxpayer did not report enough taxable income and would owe tax with interest and penalties.

U.S. shareholder loans with below market interest rates are considered Constructive Dividends.   No interest paid on loans is a definite flag.

The loan  maximum balance and detail of the financials showing no interest expense is exposed on Form 5471 which is filed along with the US individual tax return.

Keep an eye on the "Due from Shareholder" and try and make sure that any payments are used for necessary and ordinary business expenses, and not for personal use and/ or maybe consider charging interest.
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Lori 
CIRCULAR 230 NOTICE:
To the extent that this message contains advice regarding tax matters, it is not intended or written to be used, and it cannot be used, by any taxpayer for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. This disclaimer is provided pursuant to U.S. Treasury Regulations governing tax practice.