{"id":491,"date":"2024-01-09T20:44:21","date_gmt":"2024-01-09T20:44:21","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguireassociates\/?p=491"},"modified":"2024-03-01T21:31:59","modified_gmt":"2024-03-01T21:31:59","slug":"deadline-reminder-2023-prescribed-rate-loan-interest-payment","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/deadline-reminder-2023-prescribed-rate-loan-interest-payment\/","title":{"rendered":"Deadline Reminder: 2023 Prescribed Rate Loan Interest Payment"},"content":{"rendered":"<div class=\"elementor-element elementor-element-576a938 elementor-widget elementor-widget-theme-post-title elementor-page-title elementor-widget-heading\" data-id=\"576a938\" data-element_type=\"widget\" data-widget_type=\"theme-post-title.default\">\n<div class=\"elementor-widget-container\">\n<h1 class=\"elementor-heading-title elementor-size-default\">Deadline Reminder: 2023 Prescribed Rate Loan Interest Payment<\/h1>\n<\/div>\n<\/div>\n<div class=\"elementor-element elementor-element-c581e5c elementor-widget elementor-widget-post-info\" data-id=\"c581e5c\" data-element_type=\"widget\" data-widget_type=\"post-info.default\">\n<div class=\"elementor-widget-container\">\n<ul class=\"elementor-inline-items elementor-icon-list-items elementor-post-info\">\n<li class=\"elementor-icon-list-item elementor-repeater-item-c02e8ee elementor-inline-item\"><span class=\"elementor-icon-list-text elementor-post-info__item elementor-post-info__item--type-date\">January 9, 2024<\/span><\/li>\n<\/ul>\n<\/div>\n<\/div>\n<div class=\"elementor-element elementor-element-d25d368 elementor-widget elementor-widget-theme-post-content\" data-id=\"d25d368\" data-element_type=\"widget\" data-widget_type=\"theme-post-content.default\">\n<div class=\"elementor-widget-container\">\n<div class=\"elementor elementor-6016\" data-elementor-type=\"wp-post\" data-elementor-id=\"6016\" data-elementor-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\" data-elementor-post-type=\"post\">\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7a0195e3 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7a0195e3\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6f7f81e2\" data-id=\"6f7f81e2\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-2b2e19d elementor-widget elementor-widget-text-editor\" data-id=\"2b2e19d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p><a href=\"https:\/\/wellington-altus.ca\/wp-content\/uploads\/2024\/01\/AWPG_Deadline_Reminder_2023_Prescribed_Rate_Loan_Interest_Payment_01_2024_Final_EN.pdf\" target=\"_blank\" rel=\"noopener\">Download this PDF here.<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-2c748e3 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"2c748e3\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-9fad0df\" data-id=\"9fad0df\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-dd65904 elementor-widget elementor-widget-text-editor\" data-id=\"dd65904\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p class=\"p1\">Clients who have implemented a prescribed rate loan should be reminded to pay the appropriate interest relating to the 2023 year\u00a0<strong>on or before January 30, 2024.<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2 class=\"elementor-heading-title elementor-size-default\">What is a prescribed rate loan?<\/h2>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d3677fb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"d3677fb\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-e291074\" data-id=\"e291074\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-438d6ae elementor-widget elementor-widget-text-editor\" data-id=\"438d6ae\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p>A prescribed rate loan is one of the few income-splitting opportunities provided to Canadians that does not contravene the various \u201cattribution rules\u201d found in Canada\u2019s\u00a0<em>Income Tax Act<\/em>.<\/p>\n<p>A prescribed rate loan strategy allows Canadians to loan to, and legitimately place income and gains earned from the loan proceeds in the hands of, their spouse, common-law partner or an\u00a0<em>inter vivos<\/em>\u00a0trust with beneficiaries who are taxed at lower marginal rates. When structured properly, the family unit will pay less income tax on a combined basis on such income and gains.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2 class=\"elementor-heading-title elementor-size-default\">When is the interest due?<\/h2>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-c73ccb6 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"c73ccb6\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-a7fe847\" data-id=\"a7fe847\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-fa721d3 elementor-widget elementor-widget-text-editor\" data-id=\"fa721d3\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p>Interest on a prescribed rate loan must be \u201c<em>paid not later than 30 days after the end of the particular year<\/em>.\u201d As \u201c<em>particular year<\/em>\u201d in most instances refers to a calendar year, the year-end is December 31. To ensure that any outstanding prescribed rate loans remain valid, the borrower must ensure that the required interest is paid to the lender\u00a0<strong>on or before January 30, 2024.<\/strong><\/p>\n<p>The payment of interest is required even if the prescribed rate loan was issued during the year or additional funds were loaned or repaid. Where the loan balance has changed in the year (e.g. a payment was made to principal), the interest payable should be prorated based on the number of days in the year that each different balance was outstanding.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-bb5ff54 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"bb5ff54\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d46aad5\" data-id=\"d46aad5\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-204ed53 elementor-widget elementor-widget-text-editor\" data-id=\"204ed53\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p><strong>For example:<\/strong><\/p>\n<ol>\n<li>A $100,000 prescribed rate loan at 5% interest was established on December 1, 2023. The accrued interest for the period December 1 \u2013 31 must be calculated and paid no later than January 30, 2024.<\/li>\n<li>A $2 million prescribed rate loan was set up on July 1, 2023, half the loan principal ($1 million) was repaid on December 15, 2023. Interest for 2023 will be calculated as 5% on $2 million (July 1 \u2013 December 14) plus 5% on $1 million (December 15 \u2013 31). Interest must be paid no later than January 30, 2024.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2 class=\"elementor-heading-title elementor-size-default\">How should interest be paid?<\/h2>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-0bca15f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"0bca15f\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-c0a8922\" data-id=\"c0a8922\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-000fed9 elementor-widget elementor-widget-text-editor\" data-id=\"000fed9\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p>It is best practice for the borrower to pay the required interest from their own separate account. Using joint chequing or investment accounts to make the interest payments should be avoided. Where a prescribed rate loan is in place between spouses or common-law partners, the borrower often pays the interest from their investment account to the lender\u2019s investment account.<\/p>\n<p>Interest payments should be documented to provide support should the Canada Revenue Agency request evidence. As with other supporting tax information, it is generally recommended to retain this documentation for a period of at least six years.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2>What happens if the interest is not paid?<\/h2>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-8ae445b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"8ae445b\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5e0650e\" data-id=\"5e0650e\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-13e3e78 elementor-widget elementor-widget-text-editor\" data-id=\"13e3e78\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p>If the interest is not paid on time, then the \u201cattribution rules\u201d will apply and the tax benefits of the prescribed rate loan strategy will be lost.<\/p>\n<p>While a new prescribed rate loan can be established to regain the tax benefits, there are several negative outcomes that can arise if the interest payment is not made on time:<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-42a012b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"42a012b\" data-element_type=\"section\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;,&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-eff96b1\" data-id=\"eff96b1\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-6faad5b elementor-widget elementor-widget-text-editor\" data-id=\"6faad5b\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p><strong>\u2022 Professional Fees:<\/strong>\u00a0Establishing a prescribed rate loan generally comes with professional fees. For example, a lawyer would have to be engaged to draft a new loan agreement to document the new prescribed rate loan. Additionally, professional fees from accountants and\/or tax advisors may also be required.<\/p>\n<p><strong>\u2022 Lost access to lower interest rates:<\/strong>\u00a0Prescribed rates have risen sharply over the past year, and have been set at 6% for the first quarter of 2024. Given the interest rate is \u201clocked in\u201d at the time a prescribed rate loan is established, missing an interest payment may nullify a prescribed rate loan that is locked in at a lower interest rate (many have been established at 1%). Generally, the lower the prescribed rate attached to the loan, the greater the tax benefits.<\/p>\n<p><strong>\u2022 Liquidation of Portfolio:<\/strong>\u00a0Where the prescribed rate loan was used by the borrower to purchase marketable securities, it is generally best practice to liquidate the portfolio, settle the \u201cinvalid\u201d prescribed rate loan, establish a new prescribed rate loan and invest. If the original investments are disposed of at a loss and are subsequently repurchased, the superficial loss rules should be considered.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"elementor-section elementor-top-section elementor-element elementor-element-29f6a79 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"29f6a79\" data-element_type=\"section\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-container elementor-column-gap-default\">\n<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5c5c237\" data-id=\"5c5c237\" data-element_type=\"column\" data-settings=\"{&quot;premium_particles_zindex&quot;:0,&quot;premium_particles_responsive&quot;:[&quot;desktop&quot;,&quot;tablet&quot;,&quot;mobile&quot;]}\">\n<div class=\"elementor-widget-wrap elementor-element-populated\">\n<div class=\"elementor-element elementor-element-9d137fd elementor-widget elementor-widget-text-editor\" data-id=\"9d137fd\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n<div class=\"elementor-widget-container\">\n<p><strong>Note:<\/strong>\u00a0Professional tax advice should be obtained if a prescribed rate loan is offside due to missed interest payments.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Clients who have implemented a prescribed rate loan should be reminded to pay the appropriate interest relating to the 2023 year\u00a0on or before January 30, 2024.<\/p>\n","protected":false},"author":208,"featured_media":480,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[20],"tags":[],"class_list":["post-491","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth-planning"],"acf":[],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/posts\/491","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/users\/208"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/comments?post=491"}],"version-history":[{"count":3,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/posts\/491\/revisions"}],"predecessor-version":[{"id":500,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/posts\/491\/revisions\/500"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/media\/480"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/media?parent=491"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/categories?post=491"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/garriockmanningmcguiregreene\/wp-json\/wp\/v2\/tags?post=491"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}