Rolls & Estate Planning

Question 1

What is the point of a section 85 rollover?

Answer 1

Asset roll
make sure that value in = value out so that the tax is deferred

Question 2

Is section 85 considered a roll?

Answer 2

Yes

Question 3

Can section 85 be used for an estate freeze?

Answer 3

yes

Question 4

Do you need to elect to do a section 85 rollover? If yes, what form?

Answer 4

Yes, you must elect. T2057

Question 5

When would you want to use a section 85 rollover?

Answer 5

When you want to move assets into a company that exists already
OR when you’re a sole proprietor whose incorporating
*usually triggers a c/g and increased cost base, but the 85 roll allows it to occur on a tax free basis (deferred)

Question 6

What is the point of a section 85.1 rollover?

Answer 6

Share for share exchange
For public companies to acquire target corp

Question 7

Is section 85.1 considered a roll?

Answer 7

Yes

Question 8

Can you use section 85.1 to do an estate freeze?

Answer 8

No

Question 9

Do you need to elect to do a section 85.1 rollover? If yes, what form is needed?

Answer 9

No, it automatically applies unless you opt out.

Question 10

When would you use a section 85.1 rollover?

Answer 10

Public companies use it to acquire target corps.

Question 11

What is the point of a section 86.1 rollover?

Answer 11

Share exchange for estate freeze situations
freeze the value of the company in your shares & exchange for new ones

Question 12

Is section 86.1 considered a rollover?

Answer 12

Yes

Question 13

Can you use section 86.1 to do an estate freeze?

Answer 13

Yes

Question 14

Do you need to elect to use a section 86.1 rollover? If yes, what form do you need?

Answer 14

No, it automatically applies unless you opt out.

Question 15

When would you use a section 86.1 rollover?

Answer 15

Section 86.1 allows for the exchange of shares within a corp.
Corps are permitted to exchange all of the class of shares for an entirely different class of shares through 86.1 w/out incurring a tax liability for the corp/SH

Question 16

What is the point of section 51 rollovers?

Answer 16

Used when a taxpayer exchanges shares for diff shares in the corp.

Question 17

Is section 51 a rollover?

Answer 17

Yes

Question 18

Can you use section 51 to do an estate freeze?

Answer 18

Yes

Question 19

Do you need to elect to do a section 51 rollover?

Answer 19

No, it automatically applies unless you opt out?

Question 20

When do you use a section 51 rollover?

Answer 20

Section 51 is a true exchange of shares
(unles 86.1 & 85 which are a redemption of old shares + acquisition of new shares)

Question 21

Which rollover require an election to perform?

Answer 21

Section 85 (T2057)
*but ITA 87 & ITA 88.1 require paperwork to be filed

Question 22

What is the point of an amalgamation using ITA 87?

Answer 22

An amalgamation occurs when 2+ corps (predecessor corps) combine their businesses to form a NEW successor corp.

Question 23

Is ITA 87 amalgamation a rollover?

Answer 23

Yes

Question 24

Can you use ITA 87 amalgamation to do an estate freeze?

Answer 24

No

Question 25

Do you need to elect to do an amalgamation using ITA 87? If yes, which forms?

Answer 25

No election, but must file paperwork for it to become actionable/instated.

Question 26

When would you NOT do an ITA 87 amalgamation?

Answer 26

You would not use this in an AOC situation, as the AOC rules would take precedence and wipe out some of the benefits of the amalgamation rules.

Question 27

What does it mean to wind up?

Answer 27

Refers to closing of operations, selling off assets, paying off creditors, and distributing any remaining assets to the owners.

Question 28

What is ITA 88.1?

Answer 28

A rollover provision that allows the tax-free combination of the assets of a 90%+ owned subsidiary w their parent.

Question 29

Is ITA 88.1 considered a rollover?

Answer 29

Yes

Question 30

Can you use ITA 88.1 to do an estate freeze?

Answer 30

No

Question 31

Do you need to elect to use ITA 88.1? If yes, what form?

Answer 31

No election, but paperwork must be filed for the wind-up to become actionable / instated.

Question 32

When would you wind-up a corporation?

Answer 32

Winding up is step 1 before dissolving a business (step 2).

Question 33

How do you wind-up?

Answer 33

Sell all the assets of your business (asset sales) and then pay down all the entity's liabilities w the cash. Then you can decide to dissolve after.

Question 34

What's the alternative to selling the assets of your business?

Answer 34

Selling the shares of your business.