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Section 85 rollover planner.

Model an Income Tax Act s. 85(1) tax-deferred transfer of property to a Canadian corporation. See the valid elected-amount range, the immediate capital gain at each choice, the ACB of the shares received, and the practical sweet spot most practitioners use.

  • Elected-amount range under s. 85(1)(b)–(c)
  • Immediate capital gain at your chosen elected amount
  • ACB of shares received under s. 85(1)(g) & (h)
  • Boot & PUC implications
Inputs & results

All amounts in Canadian dollars. Capital gains inclusion rate set to the standard 50%, adjust if the proposed 2024 inclusion-rate changes apply to your facts.

Property being transferred
$
The transferor’s tax cost in the property, for shares of an opco, typically the original subscription price or rollover-adjusted basis.
$
Consideration received from the corporation
$
Most planning caps boot at the ACB to preserve full deferral.
$
Must equal FMV of property minus boot for s. 85 to apply.
Election
$
Default set to ACB for full deferral. Adjust to model partial-gain crystallization (e.g., to use the lifetime capital gains exemption).
%
Half the combined federal and provincial marginal rate, since half of a capital gain is taxable. The default, 26.76%, is half of Ontario’s top rate of 53.53%. Adjust for your province and bracket.
Valid elected-amount range (s. 85(1)(b)–(c))

Must be at least the greater of (boot, ACB) and no more than FMV. Outside this range the election is invalid.

Election is within the valid range.
Tax outcome at chosen elected amount
Deemed proceeds (elected amount)
Less: ACB of property
Immediate capital gain (elected amount − ACB)
Taxable capital gain (50% inclusion)
Estimated tax payable today
ACB of shares received (post-rollover)
Elected amount
Less: boot received
ACB of shares received (s. 85(1)(g)–(h))
ACB per share
Deferred gain (future, when shares are sold)
Email me the Section 85 rollover plan as a PDF.

We’ll send a one-pager with your inputs, the elected-amount range, the immediate-gain math, and the resulting ACB of shares, useful for review with your tax accountant before filing T2057.

We’ll send the PDF. Check the box above for occasional corporate-records tips by email. We don’t share your email.

Transfer property to a corporation without triggering tax, today.

Section 85(1) is the workhorse of Canadian corporate reorganizations. Holdco/opco structures, estate freezes, post-mortem planning, butterfly transactions, all start with a s. 85 rollover.

1
Eligible property

Capital property, eligible capital property, inventory (other than real estate inventory), Canadian/foreign resource property, and some real property. Cash is excluded.

2
Joint election on T2057

Transferor and corporation jointly file Form T2057 by the earlier of either party’s tax return due date for the year of transfer.

3
Choose the elected amount

Must be at least the greater of (boot received, ACB) and no more than FMV. Choosing ACB defers all gain; choosing higher crystallizes some gain.

4
ACB of shares is set

ACB of preferred + common shares received = elected amount minus boot. The deferred gain reappears when those shares are eventually sold.

Section 85 sits at the heart of Canadian corporate planning.

Section 85 rollover The mechanic itself, defined Form T2057 The election form itself Holdco / opco structure Built on s. 85 rollovers Estate freeze Often executed via s. 85 + s. 86 Section 86 reorganization Internal share-for-share exchange Lifetime capital gains exemption Sometimes crystallized via s. 85 Corporate Records Health Check Verify the post-rollover record is clean Cap Table Dilution Calculator Model the resulting share structure For holdco owners Octelligence for owner-managed holding companies

Keep the evidence with the record.

Octelligence doesn't prepare tax returns, elections or filings. It keeps the resolutions, share issuances and supporting documents your advisers work from in one corporate record, with an activity log of every change.

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