CRA has confirmed that the forgivable portion of the CEBA loan is a form of government assistance, and as such, you will have to include it as income in the year that the loan is received. That means, if you received the loan in the 2020 taxation year, you would have to include the forgivable portion ($10,000) as income in your 2020 income tax return.
If in 2022, repayment of the loan cannot be made in full, the forgivable benefit will be forfeited and an income deduction would be available under paragraph 20(1)(hh) of the Income Tax Act. If the deduction creates a loss, you would be able to carry back the loss up to 3 prior taxation year ends to recover the income tax paid in the past.
Income Tax reference: the forgivable portion of CEBA are taxable when received (ITA s. 12(1)(x)), but if and when repaid, are deductible when repaid (ITA s. 20(1)(hh)).
The same principle will apply to the CEBA Expansion for the additional $20,000.
If your bank has set up your CEBA loan as a line of credit, it's very important for you to transfer the funds from the line of credit to your operating account. The forgivable 25% is based on the maximum balance of the loan up to December 31, 2020, (at least for the $40,000 loan). If any bank has set up the CEBA loan like a Visa or LOC it will have the same results.