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  • Anmol Trehin

Unlocking the Benefits: A Beginner's Guide to the s 85 Rollover Provision

s 85 rollover, CCPC, income tax act, mergers and acquisitions, corporate commercial lawyer, business lawyer, astre legal, anmol trehin

In today's post, we delve into the Section 85 ("s 85") rollover provision, a Canadian tax provision which allows the transfer of property to a corporation without incurring immediate tax liability. As a Canadian-controlled private corporation (a "CCPC") owner, understanding this tax provision can be crucial to the success of your business.


The s 85 rollover allows for a tax deferral on the transfer of certain types of property, including eligible capital property, depreciable property, and non-depreciable capital property. This deferral allows the transfer to occur without triggering a tax liability, as the transferor is deemed to have received proceeds equal to the adjusted cost base of the property. In exchange for the property, the corporation issues what are called “rollover shares”. These shares are issued as compensation for the property.

Imagine you are Sally, the proud owner of a successful catering business. After years of hard work, your business has grown and expanded, and you are now considering incorporating it. To do so, you will need to transfer all your equipment, including high-end cookware and catering vans, to the new corporation.

If you were to sell this equipment to the corporation, you would likely have to pay tax on the resulting sale. However, there is a way to defer this tax liability: by using a s 85 rollover. By taking advantage of this tax provision, you can defer the tax that would normally result from selling the property to the corporation.

In exchange for your equipment, you will receive rollover shares in the new corporation. This is true regardless of whether you already own shares in the corporation. With the s 85 rollover, you can incorporate your business and transfer your assets without facing unnecessary tax consequences.

What is a CCPC

The Canada Revenue Agency (“CRA”) has a list of the requirements for what defines a Canadian-controlled private corporation. In broad terms, this label applies to private Canadian corporations that are controlled by Canadian individuals and private corporate residents.

The full list of requirements for a CCPC is defined under the Income Tax Act (the "Act") Consult with your tax advisor to determine whether your company falls under the label of a Canadian-controlled private corporation.

Conditions for a s 85 Rollover

There are three overarching conditions to perform a s 85 rollover:

  1. The buyer must be a CCPC.

  2. The property being sold must be eligible property under the Act. This includes capital property, real or immovable property, and inventory. Consult with your tax advisor to determine which property is eligible.

  3. The seller must receive at least one share as payment for the price of the property sold (the rollover shares). This applies even if the seller is, and continues to be, the sole shareholder of the purchasing corporation.

The Rollover Process

It may be necessary to amend the corporation’s internal structure before proceeding with a rollover. This means not only modifying the capital structure to add a new category of rollover shares but also amending the rights and obligations of the existing categories of shares.

Once the share structure is amended, a contract is drafted between the corporation and the seller in which the property being sold is described, the price of the property is set, and the number and description of the shares being issued in exchange for the property, amongst other salient aspects.

Next, corporate resolutions authorizing the corporation to sign the rollover contract are drafted.

Once the transaction is concluded, the corporate records including the share registry, and the shareholder register, and issue the share certificate for the rollover shares are updated.

That’s not all - a rollover is not automatic. In addition to preparing the corporate documents, and agreements, and issuing shares, the corporation must file a form (the form T2057) with the CRA notifying them of this election.


A s 85 rollover is a useful tax provision for Canadian-controlled private corporations and their shareholders. It allows for the tax-free transfer of certain types of property, which can be beneficial for estate planning, corporate reorganizations, and acquisitions. However, there are specific requirements that must be met to qualify for the rollover, and it is important to consult with a tax professional to determine eligibility.

Contact our business law firm today to get started. We work closely with tax professionals to help our corporate clients achieve a seamless rollover process.


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