Rolls & Estate Planning Flashcards
What is the point of a section 85 rollover?
Asset roll
make sure that value in = value out so that the tax is deferred
Is section 85 considered a roll?
Yes
Can section 85 be used for an estate freeze?
yes
Do you need to elect to do a section 85 rollover? If yes, what form?
Yes, you must elect. T2057
When would you want to use a section 85 rollover?
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)
What is the point of a section 85.1 rollover?
Share for share exchange
For public companies to acquire target corp
Is section 85.1 considered a roll?
Yes
Can you use section 85.1 to do an estate freeze?
No
Do you need to elect to do a section 85.1 rollover? If yes, what form is needed?
No, it automatically applies unless you opt out.
When would you use a section 85.1 rollover?
Public companies use it to acquire target corps.
What is the point of a section 86.1 rollover?
Share exchange for estate freeze situations
freeze the value of the company in your shares & exchange for new ones
Is section 86.1 considered a rollover?
Yes
Can you use section 86.1 to do an estate freeze?
Yes
Do you need to elect to use a section 86.1 rollover? If yes, what form do you need?
No, it automatically applies unless you opt out.
When would you use a section 86.1 rollover?
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
What is the point of section 51 rollovers?
Used when a taxpayer exchanges shares for diff shares in the corp.
Is section 51 a rollover?
Yes
Can you use section 51 to do an estate freeze?
Yes
Do you need to elect to do a section 51 rollover?
No, it automatically applies unless you opt out?
When do you use a section 51 rollover?
Section 51 is a true exchange of shares
(unles 86.1 & 85 which are a redemption of old shares + acquisition of new shares)
Which rollover require an election to perform?
Section 85 (T2057)
*but ITA 87 & ITA 88.1 require paperwork to be filed
What is the point of an amalgamation using ITA 87?
An amalgamation occurs when 2+ corps (predecessor corps) combine their businesses to form a NEW successor corp.
Is ITA 87 amalgamation a rollover?
Yes
Can you use ITA 87 amalgamation to do an estate freeze?
No
Do you need to elect to do an amalgamation using ITA 87? If yes, which forms?
No election, but must file paperwork for it to become actionable/instated.
When would you NOT do an ITA 87 amalgamation?
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.
What does it mean to wind up?
Refers to closing of operations,
selling off assets,
paying off creditors,
and distributing any remaining assets to the owners.
What is ITA 88.1?
A rollover provision that allows the tax-free combination of the assets of a 90%+ owned subsidiary w their parent.
Is ITA 88.1 considered a rollover?
Yes
Can you use ITA 88.1 to do an estate freeze?
No
Do you need to elect to use ITA 88.1? If yes, what form?
No election, but paperwork must be filed for the wind-up to become actionable / instated.
When would you wind-up a corporation?
Winding up is step 1 before dissolving a business (step 2).
How do you wind-up?
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.
What’s the alternative to selling the assets of your business?
Selling the shares of your business.
