CRA may challenge alleged payments of dividends through book entries

In response to a suggestion that a dividend to a sole individual shareholder was paid through a journal entry recording an increase in a loan owing to the shareholder or a decrease in a loan made to her, CRA stated:

The necessary documentation must be provided in a particular instance to corroborate that factually and legally a dividend has been paid by the corporation and received by the shareholder.  In this regard, book entries are ancillary and serve only to report transactions [citing Hickman].

Sounds like a set-off agreement or written loan amendment would be a good idea.

Neal Armstrong.  Summary of 30 January 2014 T.I. 2013-0515761E5 F under s. 82(1).