Mr. Nesbitt relocated his private business, Leverage-Lovers Limited, to Alberta from Ontario at the end of May 2018. As a result of the move, the corporation made the following loans on June 1, 2019 to Mr. Nesbitt, the president and majority shareholder: 

(a) a $75,000 loan at 2% interest per year with a five-year term but amortized over a 25-year period to purchase a house in the new location; 

(b) a $5,000 loan at 5% interest per year with no definite term to buy furniture for the new house; and 

(c) a $10,000 loan with no interest but with a five-year term to buy previously unissued, fully paid shares from the corporation. The corporation uses the calendar year as its fiscal year, and by the end of 2020, all the loans described were still outstanding. Any interest required to be paid on the loans at the indicated rates was paid in 2019. Assume that the prescribed rates applicable to shareholder loans during 2019 were: 1st quarter, 4%; 2nd quarter, 3%; 3rd quarter, 4%; and 4th quarter, 4%. Ignore the effects of the leap year, if applicable. — REQUIRED Discuss the tax consequences in 2019 of the loan described,

Answer rating: 100% (QA)

In 2019 there are tax consequences associated with the loans provided by LeverageLovers Limited to M... View the full answer