A Section 85 Tax Rollover ("rollover") is term used to
describe a special tax technique that allows a taxpayer to defer
all or part of the income which would otherwise be taxed upon
transfer. In other words, it allows a taxpayer to defer paying
taxes on assets transferred. This is especially useful for sole
proprietorships looking to incorporate, or for transfers between
affiliate companies.
Through Section 85 of the Income Tax Act, certain types of
eligible property can be transferred to a transferee corporation.
Eligible property can include capital property, Canadian and
foreign resource properties, some types of inventory, and some
types of real estate.
When transferring eligible property through a Section 85 Tax
Rollover, there are two key things to keep in mind:
