Example of calculating the taxable benefit
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
Example of calculating the taxable benefit
Example
Joshua is your employee. He borrowed $150,000 from you at the beginning of the year. The prescribed rate of interest for the loan is 3% for the first quarter, 4% for the second and third quarters, and 5% for the fourth quarter. Joshua paid you $2,000 interest on the loan no later than 30 days after the end of the year. During the year, a company related to you paid $1,000 interest on the loan for Joshua. Before the end of the same year, Joshua repaid the $1,000 to the company.
Calculate the benefit to include in his income as follows:
| Prescribed interest rate | Loan amount | Part of year | Interest for the quarter |
|---|---|---|---|
| 3% | $150,000 | 1/4 | $1,125 |
| 4% | $150,000 | 1/4 | $1,500 |
| 4% | $150,000 | 1/4 | $1,500 |
| 5% | $150,000 | 1/4 | $1,875 |
Total interest for the quarters ................................................................................. $6,000
Plus
Amount paid by a third party .................................................................................. $1,000
Minus
Interest paid ($2,000 + $1,000) ................................................................................ $3,000
Amount Joshua repaid .............................................................................................. $1,000
Equals
Joshua's taxable benefit ................................................................................... $3,000
- Date modified:
- 2016-12-15