Please assit with the following question:
Close Corporation A - Member is Mr. Smith
Close Corporation B - Member is Mrs. Smith (Married in community of property with Close Corporation A's member)
Close Corporation A loaned R 1000 000 to Close Corporation B, interest free and no terms of repayment.
The financial statements were drafted as a loan. SARS then audited Close Corporation A, and then deemed the loan to be a dividend.
We have to amend the Annual Financial Statements accordingly.
Close Corporation A - Debit dividends paid, credit loan account. Raise 10% to the income statement (Debit) and credit Receiver of Revenue account.
Now, the tax has already been accounted for.
My question (1) is Close Corporation B - How do we account for the dividend? It cannot be dividends received, as Close Corporation B is not a member / shareholder of Close Corporation A.
My question (2), should it be regarded as dividends received in Close Corporation B, if the funds are eventually withdrawn by the Member of Close Corporation A, will there be another STC liability?
Please assist as a matter of urgency.