CRA reassessed my corporation for shareholder benefits — what does that mean?

A shareholder benefit reassessment means CRA has concluded that your corporation conferred a taxable benefit on you as a shareholder that was not included in your personal income. Common examples include: personal expenses paid by the company (car expenses, home renovations, vacations), interest-free or low-interest loans from the corporation to a shareholder, or use of corporate property for personal purposes.

The Income Tax Act requires that the value of benefits received from a corporation in your capacity as a shareholder be included in your personal income for the year. CRA typically discovers these situations during a corporate audit, after which it reassesses both the corporation and the individual shareholder. The corporation may also be denied the expense deduction if the expense was personal.

Shareholder benefit reassessments can be significant because they compound: you are personally taxed on the benefit, the corporation is denied the deduction, and penalties may apply to both parties. The distinction between a shareholder benefit and a legitimate business expense often comes down to documentation of the business purpose. If you receive such a reassessment, review all related corporate expense records and consider whether the business-purpose case can be strengthened before filing an objection.