CRA discusses the relationship between the s. 15(2) and s. 80.4(2) income inclusions respecting an unpaid shareholder loan
A shareholder receives a loan from the corporation in 2017, does not repay the loan but chooses to report the loan in 2019. CRA indicated that the application of s. 15(2), so as to include the loan amount in the shareholder’s income, is suspended until the time period in s. 15(2.6) has been passed (i.e., the end of 2018). In the meantime, s. 80.4(2) “would apply for the entire period during which the loan or debt was not repaid,” so as to impute interest throughout 2017 and 2018. When the 2017 income inclusion was reported in 2019, the previous inclusions under s. 80.4(2) would be backed out of the taxpayer’s income by virtue of s. 80.4(3)(b).