Do I file Section 85 even if no tax is owed?
Election obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. Owners incorporating a business or reorganising a holding structure, including cross-border groups moving assets into a Canadian company.
What happens if I have missed Section 85 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Section 85 the same as the other reports I already file?
No. The rollover election that transfers property into a corporation on a tax-deferred basis. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
Can I move my business into a company without triggering tax?
That is what the rollover election under Section 85 is for: it transfers property into a corporation on a tax-deferred basis rather than treating the transfer as a disposal. It is not automatic. Incorporating and then moving assets across does not by itself defer anything; the deferral comes from an election that has to be filed, supported by valuations of what moved. The other thing to settle first is what the corporation gives back for the property, because the elected amounts and the consideration together decide the result, not the intention behind the reorganisation.
Do I need a valuation before filing a rollover election?
Yes. The election is filed with supporting valuations, and treating that as a formality is how these files go wrong. The elected amounts decide the tax result, and an elected amount is only as defensible as the valuation standing behind it: a figure chosen for convenience is a figure that can be displaced later, with the deferral it was meant to secure going with it. For goodwill and for shares in a private company this is genuine valuation work rather than a certificate, and it is better commissioned before the reorganisation is signed than assembled afterwards.
What happens if the elected amount turns out to be wrong?
The elected amounts are what the tax result is built on, so an amount that cannot be supported puts the deferral itself in question rather than producing a small adjustment somewhere. This is why the valuation work and the paperwork are done together: the agreement transferring the property, the consideration the corporation gives back, and the election filed over the top all have to describe the same transaction. Where we are brought in after the fact, the first job is establishing what was actually elected and whether the documents around it agree with each other.
Will the other country recognise a Canadian rollover on incorporation?
Not necessarily, and it is the question to answer before signing rather than after. A deferral granted under Canadian law binds Canada. The country where the owner or the wider group is taxed may treat the same transfer as a disposal and tax it on its own terms. A reorganisation that is neat on one side of the border and a taxable event on the other can cost more than the deferral saves. Where a cross-border group is moving assets into a Canadian company, we look at both sides before the elected amounts are fixed.
Does a rollover election cover every asset I put into the company?
Only the property the election is made for. Each item transferred has to be identified, valued and dealt with deliberately, and it is common for some assets to go across under the election while others are simply sold to the company or left outside it. Inventory, goodwill, equipment and real property do not behave identically, and an election drafted as though they do tends to unravel at the first question. The practical step is a schedule of what moves, what each item is worth, and what the corporation gives back for it.
Is the rollover automatic when I incorporate my business?
No. Incorporating creates a company; it does not move anything into it, and moving assets across without an election is a transfer that stands on its own terms. The deferral comes from the election, filed with the valuations that support the amounts in it. Owners frequently discover this a year later, when the incorporation was handled as a registration exercise and nobody prepared the transfer documents or the election behind them. Where that has happened, the work starts with establishing what actually moved and when, because that is what the position has to be built on.
Which business structure has double taxation?
The corporation — specifically a US C corporation, where profit is taxed to the company and the dividend again to the shareholder. Sole proprietorships, partnerships and LLCs treated as flow-throughs are taxed once, in the owners' hands. Across borders that tidy answer breaks: an entity treated as a flow-through in one country can be opaque in the other, which produces a mismatch neither system planned for. See LLC against corporation for Canadians.
Do I pay tax twice on a foreign dividend?
Not at full rates if the relief is claimed. The paying country usually withholds at source, capped by treaty where one applies and the paperwork is in place; your residence country then taxes the dividend and credits the foreign withholding against its own charge. Where the withholding exceeded the treaty rate because no declaration was filed, the excess is recovered from the paying country, not credited at home. See the dividends article.
