What is a Section 85 Rollover and When Should You Use One

A Section 85 Rollover can be used to reduce personal taxes when incorporating your business. This video will explain how a S85 works and give some examples to illustrate this tax planning technique.
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CONTENTS OF THIS VIDEO
00:00 - Intro
00:45 - What is a Section 85 Rollover?
01:30 - How Does a Section 85 Work?
02:20 - Why Use a Section 85 Rollover?
02:59 - Common Scenarios for Using a Section 85
04:22 - Example 1: Incorporating When Goodwill Exists
05:28 - Example 2: Transferring Land to a Corporation
06:58 - How to Complete a Section 85 Rollover
07:12 - Step 1 - Determine the Value of Assets
07:30 - Step 2 - Incorporate a New Company
08:00 - Step 3 - Transfer Assets Using Form T2057
08:37 - Step 4 - Declare Any Capital Gains on Personal Taxes
09:01 - Should a S85 Always Be Used When Goodwill Exists?
09:28 - Example Where Goodwill is Attached to the Owner
09:58 - Final Thoughts
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MENTIONED IN THIS VIDEO
► What is a Section 85 Rollover Blog Post
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► How to Incorporate a Company Blog Post
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► How to Fill the T2057 Form
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[@ironandpearl]

"I highly don't recommend reading it " 😂😂 Thank you for these videos! It's much nicer listening to you then my eyes closing involuntarily while reading the CRA site. 😜

[@AvalonAccounting]

😄You are most welcome! Glad you enjoy our cheesy jokes!

[@Sophie-jl3sj]

I am a CPA, I hope to be better than average CPAs. Section 85 is commonly used when parents want to transfer their business to their children, it would be the same logic if an individual wants to transfer it to their parents instead of their children. However, what would happen when their parents are not Canadian residents if they were able to transfer it to a non-Canadian resident, does that mean they don't have to worry about paying tax on CG forever? I am looking forward to discuss with you :)

[@rickgiesbrecht7612]

Great help. Thanks! Question: As a previous sole prop with about $100,00] in assets, equipment and now incorporated for 1 year, what do i do!?

[@roxannagholami5410]

Thanks for the video! Can this form be used when transferring a rental property from a personal name to a holding company?

[@cyabaib]

Great video!!

[@zshn]

Wouldn't it be just simpler if one started as a corp instead of sole-prop?

[@AvalonAccounting]

Simpler for sure, but sometimes it's hard to tell in the early days whether the business will be successful. Plus, there are some tax benefits for running your early losses in a sole proprietorship, especially when you haven't quit your day job yet!

[@MariaH-bu5or]

You'll be smarter than your average CPA, nice one ha ha ha!

[@suederavi9149]

My husband and I are the shareholders of a corporation. I am the sole proprietor as well who wants to roll my business over to our corporation. Do I need to fill up form T2057 or use section 85. The only assets I have are my computer and my printer. I am preparing taxes.

[@AvalonAccounting]

Hey Sue - if the only assets are truly just a computer and printer it doesn't sound like a S85 is needed. However without knowing the full picture of things we couldn't really give a definitive answer. It's one of those "you would be best to consult with your accountant" type of questions, unfortunately.

[@11511mido]

In my case I did rollover using section 85. Goal is to move the ownership of a corporation to holding company. the impact here is I got preferred shares.will i still qualify for lifetime capital gains?

[@Sophie-jl3sj]

Yep