What is a section 85 rollover when I transfer assets into my Ontario corporation?

When you transfer appreciated property — such as goodwill, equipment, or real estate — into a corporation, the Income Tax Act deems the transfer to occur at fair market value, potentially triggering a taxable capital gain or recapture. A section 85 rollover election lets you and the corporation jointly elect to transfer eligible property at an agreed amount, often your original cost, so no immediate tax is triggered.

The rollover defers the accrued gain, not eliminates it. Your shares in the corporation reflect a lower adjusted cost base, so the gain resurfaces when you sell those shares. The advantage is controlling the timing of when you pay tax on the gain.

Not all property qualifies — the election covers capital property, eligible depreciable property, and certain other assets. The agreed amount cannot be less than any liabilities the corporation assumes or less than the undepreciated capital cost for depreciable property, among other rules. Filing must be done on time on the prescribed CRA form. Because the mechanics are intricate and errors can produce unexpected tax, always work with a tax professional to structure and file a section 85 rollover correctly.