Section 85 of the Canadian Income Tax Act is a provision that permits an individual to elect a transfer of eligible property, on a tax deferral basis, to a taxable Canadian corporation - a process also known as a Rollover. In essence, a rollover allows a taxpayer to suspend all or part of the tax payments, one would normally be required to pay upon on the transferring assets to a Canadian corporation, depending on their objectives.

Such a rollover is often used in, but not limited to, the following situations:
 

• Sole proprietors who are looking to incorporate their business and transfer his/her assets to the newly incorporated company;

• Estate planning;

• Capital gains crystallization; and

• Transfer of assets from one business to another

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In contract, section 86 of the Canadian Income Tax Act allows for the exchange of shares within a corporation. Corporations are permitted to exchange all the class of shares for an entirely different class of shares within the company without incurring a tax liability for the corporation or the shareholders. 

 

Amskor Law will provide the best solution for your company whether to perform a section 85, a section 86, or to create a different legal approach to achieve your ultimate objective in creating your optimal corporation structure.