Expert: Ed McFarland - 11/4/2005

Question
Hi Ed,

You may not be able to help as I assume you are U.S based. I run a small gardening business, a sole propietorship in British Columbia, Canada. Since I had no start-up capital I "loaned" the business personal money as it became available. Then, any money the business earned I paid back to myself until the business was in the black. Can I claim this "loan" and/or "loan payments" as a business expense?

Thanks  

Answer
Being US based, I'm not exactly sure how Revenue Canada would look at it, but the return of capital should not be a taxable event. You are returning after tax money to yourself.

I doubt you could claim a deductable expense. It would be returning shareholders equity. Any interest expense would not be allowed.

Good luck.