A POTPOURRI OF TAXATION ISSUES
AFFECTING AN ONGOING BUSINESS
Gregory Swanson
Pedersen, Norman·MoLeod & Todd
500-2220-12thAve.
P.O. Box 1087
Regina, Bask. B4P 8B2
Ph: 565-4100 Fax: 757-4858
BIOGRAPHICAL INFORMATION
Gregory Swanson
Greg received a Bachelor of Administration from the University of Regina In 1976. In 1977, he received an
LL.B. from the University of Saskatchewan. Greg was called to the Saskatchewan Bar in 1978. His
practice includes taxation, wills and estates, and corporate & commercial law. From 1977 to 1979 Greg
was chair of. the CSA (8a,sk, Branch) Taxation Trusts' and'Wilis (South Section). He has also preSented
papers to the CSA (Sask Branch)" Taxation South Section and in 1994 presented a paper at the CBA
Mid-Winter Meeting on "Taxation Issues in L1tigation Matters." From 1990 to 1994 Greg lectured at the Bar
,)
Admission Course on 'Taxation Issues in Family Law." He has presented at several CLE and SKLESI
seminars including, most recently, 'The GST - A Changing Scene" (September 1993) and 'Tax LawTips and Traps", (March 1995). Greg practices with the firm Pedersen, Norman, McLeod &Todd in Regina.
TABLE OF CONTENTS
I.
BEING AUDITED .............................................
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
B.
CO-ORDINATION OF AUDITS ..............................
C.
AUDITS - CONFRONTATIONALINON-CONFRONTATIONAL . . . . . ..
D.
PROTOCOL AGREEMENTS ................................
1
1
1
1
2
D.
LEASING VS. BUYING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
A.
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
B.
CAPITAL LEASE ........................................
C.
TRUE LEASE ...........................................
2
2
3
4
DL
PURCHASE OF COMMERCIAL USE REAL PROPERTY FROM NONRESIDENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
A.
INCOME TAX .................... " . .. .. . .. . . .. . .. . . . . ..
B.
GST.. .. ... . .. ... . ... .. . ... . . . . . . . . . .. . . . .. .. .. . . . .. ..
5
5
6
A.
IV.
PURCHASE OF COMMERCIAL USE REAL PROPERTY FROM RESIDENT
VENDORS ................................................... 7
V.
TAXATION
FRIENDLY COMPENSATION PACKAGES FOR
DISMISSEDIRETJRlNG EMPLOYEES .............................. '
A.
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
B.
ROLLOVER TO RRSP OR RPP ..............................
C.
ADDITIONAL RRSP CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . ..
D.
WITHHOLDING AT SOURCE ........................... . . ..
E.
COUNSELLING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
F.
DEATH BENEFIT .......................................
G.
DEDUCTIBILITY OF LEGAL EXPENSES ......................
H.
UNEMPLOYMENT INSURANCE COMMISSION ................
7
7
8
9
9
10
10
10
11
VL
CHANGING THE BUSINESS LEGAL ENTITY .......................
A.
ELIGIBLE PROPERTY ...................................
B.
PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
C.
CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
D.
PRICE AD3USTMENT CLAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . ..
E.
JOINT ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
F.
PAID UP CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
G.
MECHANJCS OF A SECTION 85 ROLLOVER. . .. . .. .. .. . . . . . ..
H.
GST AND ROLLOVERS ..................................
12
12
12
13
13
14
14
15
17
VD.
VID.
REVENUE CANADA FORMS .................................... 19
SAMPLE S.85 ROLLOVER AGREEMENT AND MINUTES APPROVING THE
AGREEMENT .............................................. .. 25
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I,
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A POTPOURRI OF TAXATION ISSUES AFFECfING AN ONGOING BUSINESS
L
BEING AUDITED
A.
INlRODUCfION
Revenue Canada is adopting a new approach to auditing businesses. Initially this new approach
will be applied to the audit of large businesses, those with annual gross revenues in excess of
$100,000,000,00. It is expected that this new approach will eventually apply to audits of all
businesses.
B.
CO-ORDINATION OF AUDITS
A business can be audited under several taxing statues:
)
(a)
The Income Tax Act (the Act)
(b)
The Excise Tax Act - GST
(c)
The Excise Tax Act ~ Customs and Excise
(d)
Provincial Sales Tax
At present there is no co-ordination among these audit teams. As such an income tax audit could
be conducted early in the year, a GST audit could be conducted in the middle of the year, and
a Customs and Excise audit or a Provincial Sales Tax audit could be conducted late in the year.
Generally each audit disrupts the business and consumes a considerable amount of the employees'
time. time that could be better spent earning income for the business. As well, each audit would,
for the most part, review the same documents.
Revenue Canada plans to co-ordinate its audits so that they all take place at the same time and
where possible arrange for Provincial Sales Tax audits at the same time as well. In this way the
business will be disrupted for a shorter period of time and the necessary documents are only
dragged out of storage once to be examined by taxation officials rather than three or four times.
C.
AUDITS - CONFRONTATIONAUNON-CONFRONTATIONAL
Because an audit involves Revenue Canada vs. the Taxpayer many of them become very
2
confrontational. Part of this confrontation is created because the auditor comes into the business
and "fishes around" for whatever he can find.
Revenue Canada has determined that the first 20% of the work done by the auditor generates
approximately 80% of the taxes recovered as a result of the audit. This is largely because prior
to the audit, the audit team can identify areas or segments of the business where problems may
exist. It would appear that the other 80% of the time spent by the auditor is fishing around. The
results show that the fishing expeditions are not nearly as profitable or cost effective for Revenue
Canada.
Under the new audit system, in an attempt to eliminate 8-lot of confrontation, the auditor will he
up front with the taxpayer and indicate what documents she wishes to review and the types of
discrepancies that are being looked for. As a result there should be fewer fishing expeditions.
D.
PROTOCOL AGREEMENTS
In implementing this new audit procedure Revenue Canada will be signing audit agreements with
large business taxpayers. These agreements will outline what taxation statues will be audited
regarding the taxpayer, identify the appropriate time of year when audits should be conducted and
establish various processes applicable to the audit. It is unclear whether, as this audit technique
filters down to smaller audits, similar agreements will be signed with taxpayer businesses or
whether the techniques aforementioned wilt be applied without the necessity of such protocol
agreements.
II.
LEASING VS. BUYING
A.
INTRODUcnON
In the beginning, a taxpayer either bought an asset and deducted capital cost allowance
(depreciation) each year or leased that asset and deducted the full amount of the lease payments
each year. Next came leases with options to purchase or leases with fixed commitments- to
purchase at the end of the lease.
With this change, leases became a vehicle for acquiring
)
3
ownership of assets as opposed to simply allowing for the use of that asset. The lease became
a financing tool much like a bank loan.
With the expanded nature of the leasing tool, leasing became more advantageous than buying
from an income tax perspective.
As a result of the changing uses of leases, Revenue Canada and the Courts developed new rules
regarding the tax treatment of lease payments. Leases were characterized as either "capital
leases" or "true leases", As well recapture of capital cost allowance rules were modified to
include some lease payments.
With these new rules, leasing no longer benefits from the tax advantages it once had. Today. the
question of whether a business should lease or buy an asset is purely a business decision or a
financing decision.
)
B.
CAPITAL LEASE
If the lease provides that at its termination:
a.
b.
the Lessee will become the owner of the leased property, or
the Lessee is obligated to purchase the leased asset for a fixed dollar amount,
the lease is a capital lease.
If the lease contains an option to acquire the asset at some future date the lease may be either
a true lease or a capital lease. The determining factor is the option price.
If the option price is either a nominal amount or an amount which bears no relationship to the
actual fair market value of the asset at the time the option is to be exercised the lease is a
")
"capital lease". If the option price represents a legitimate estimate, at the beginning of the lease,
4
of what the fair market value of that asset will be on the option date, the lease will be treated as
)
a "true lease",
Under a capital lease, the lease payments are not be deductible. The lessee is deemed to have
purchased the asset at the time the lease was entered into and the lessee is eligible to claim
capital cost allowance (depreciation) on the amount that would have been the actual purchase
price had the lessee purchased the asset rather than leased it.
In capital leases, the sum of all lease payments paid over the term of the lease plus the option
price will exceed the actual purchase price of the asset. This excess is treated as an interest
expense and is deductible over the term of the lease.
C.
TRUE LEASE
A true lease either contains no option or right to acquire the asset, or has an option to purchase
and the option price in the lease represents a realistic estimate, at the beginning of the lease, of
the fair market value of the asset at the future date when the option is exercised.
Lease payments made pursuant to a true lease are deductible over the life of the lease.
If, under a true lease, the option is exercised, capital cost allowance (depreciation) may be
claimed on an amount equal to the option price.
For purposes of the recapture of capital cost allowance rules] the "original cost" of the asset may
be deemed to be greater than the option price. Section 13(5) of the Act provides that the "original
cost of the asset is equal to the lesser of:
a.
the fair market value of the asset on the date ,the option is exercised, and
h.
the sum of all lease payments plus the option price.
)
5
If the lesser of these two amounts (the deemed cost) is greater than the option price, the "original
cost" of the asset will he equal to the deemed cost and the difference between the deemed cost
and the option price will be deemed to have been previously deducted as capital cost allowance
in a prior year. If the asset is later sold for an amount that is greater than the option price some
or all of this difference will be subject to taxation as recapture of capital cost allowance. 2
m.
PURCHASE OF COMMERCIAL USE REAL PROPERTY FROM NON-RESIDENTS
A.
INCOME TAX
Section 116 of the Act deals withthe sale of real property by non·residents of Canada. Nonresidents are to report proposed sales of real property to Revenue Canada Taxation using form
T2062(E) or T2062A(E). Form T2062(E) is to be used regarding the disposition of taxable
Canadian property.
Form T2062A(E) is to be used regarding the disposition of resource
properties, real property (other than capital property - ego land held as inventory). Canadian
)
timber resource property and depreciable taxable Canadian property.
If all that is being sold is bare land T2062(E) would be used. If there are buildings on the
property T2062A(E) would be used regarding the buildings ~ to calculate any recapture of capital
cost allowance or capital gain regarding the buildings and form T2062(E) would be used to
calculate any capital gain regarding the land.
The forms themselves indicate what additional documents are to be filed with Revenue Canada.
These include such things as a copy of the- Agreement of Purchase and Sale, copy of the
Statement of Adjustments, a copy of the Calculation of the Adjusted Cost Base. As well, any
taxes payable are to be paid at the time of filing these forms.
Revenue Canada will review the forms and the transactions and on being satisfied that all is in
order they will issue a certificate confirming that the taxes applicable to the transaction have been
paid. In simple transactions, it takes Revenue Canada approximately one to two months to issue
\
)
the certificate. In more complicated transactions it can take 6 months to 1 year to issue the
6
certificate.
)
Ifthis'certificate is not obtained, the purchaser becomes personally liable to remit 113 of the total
purchase price to Revenue Canada. Interest will be charged on this amount if it is not paid within
30 days after the end of the month in which the purchaser acquired the property. The purchaser
is released from this Jiability only if "after reasonable enquiry the purchaser had no reason to
believe that the non-resident person was not resident in Canada" (section 116(5)(a) of the Act).
The purchaser's solicitor should alert the vendor's solicitor early in the transaction that he will
require a certificate issued pursuant to section 116 of the Income Tax Act. As well, when the sale
proceeds are forwarded to the vendor's solicitor, in addition to the usual trust conditions, the
purchaser's solicitor should include the trust condition that the vendor's solicitor will provide him
with a certificate issued pursuant to section 116 of the Iilcome Tax Act (Canada).
B.
GST
Where a non-resident of Canada makes a supply of real property by way of sale, section 221 (2)
of the Excise Tax Act provides that the non-resident shall not collect the GST applicable to the
transaction. In this case, section 228(4) of the Excise Tax Act p.laces the responsibility upon the
purchaser to remit any applicable GST.
Where the purchaser is a registrant for GST purposes, and is acquiring property other than a
supply of a residential complex to an individual, the purchaser simply completes form GST 60
and submits that form along with its regular GST report for the reporting period during which
the real property was acquired. No GST will be payable on the transaction provided that all or
substantially all of the real property acquired is used for a commercial purpose other than in an
exempt supply.
The vendor's solicitor need not concern himself with ensuring that the purchaser properly deals
with the GST. The Excise Tax Act clearly places the responsibility upon the purchaser. As such
there is no need for the vendor's solicitor to impose trust conditions upon the purchaser or the
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7
purchaser's solicitor to ensure that GST is remitted or that the form GST 60 is filed.
IV.
PURCHASE OF COMMERCIAL USE REAL PROPERTY FROM RESIDENT
VENDORS
Where the vendor of real property is a resident of Canada, section 221(1) of the Excise Tax Act
places the obligation upon the vendor to collect and remit any GST applicable to the sale. Section
221(2)(b) provides and exception to this where the purchaser is a registrant for GST purposes,
and is acquiring property o_ther than a supply of a residential complex to an individual. In this
case the purchaser simply completes form GST 60 and submits that form along with its regular
aST report for the reporting period during which the real property was acquired. No GST will
be payable on the transaction provided that all or substantially all of the real property acquired
is used for a commercial purpose other than in an exempt supply.
Where section 221(2)(b) is applicable, the vendor's solicitor need not concern herself with ensuring
)
that the purchaser properly deals with the GST. The Excise Tax Act clearly places the responsibility
upon the purchaser. As such there is no need for the vendor's solicitor to impose trust conditions
upon the purchaser or the purchaser's solicitor to ensure that GST is remitted or that the fonn GST
60 is filed.
V.
TAXATION
FRIENDLY
COMPENSATION
PACKAGES
FOR
DISMISSEDIRETIRING EMPWYEES
A.
INTRODUCTION
Employees can cease to be employees for any number of reasons including dismissal with cause,
dismissal without cause, retirement, resignation, etc. The employer may be required (by union
agreement or court order) or choose to pay a compensation package to the departing employee.
Whatever the reason is for the departure or the payment of the compensation package, in most
cases it will be categorized as a retiring allowance for income tax purposes and will be taxable
in the hands of the former employee.
8
Section 248(1) of the Act defines "retiring allowance":
I
"retiring allowance" means an amount (other than a superannuation or pension benefit, the
amount received as a consequence of the death of an employee or a benefit described in
subparagraph 6(I)(a)(iv)) received:
a)
on or after retirement of a taxpayer from an office or employment in
recognition of the taxpayers long service; or
b)
in respect of a loss of an office or employment of a taxpayer, whether or
not received as, on account or in lieu of payment of damages or pursuant
to an order or judgment of a competent tribunal,
by the taxpayer or after the taxpayer's death by a dependant or a relation of the taxpayer
or by the legal representative of the taxpayer.
Retiring allowances are taxable in the hands of the employee pursuant to Section 56(1 )(a)(ii) of
the Act.
B.
ROLWVER TO RRSP OR RPP
Section 60(j.l) of the Act allows some or all of the retiring allowance to be rolled over into the
employees registered retirement savings plan (RRSP) or registered pension plan (RPP). The
amount of the retiring allowance which may be rolled over to the RRSP or RPP is equal to the
sum of:
a)
$2,000.00 multiplied by the number of years (or part years) the employee is
employed by the employer prior to 1996 and;
b)
$1,500.00 multiplied by the number of years (or part years) the employee is
employed by the employer before 1989 during which his employer did not mak
e contributions to a pension plan or deferred profit sharing plan regarding the
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9
employee and the number of years during which contributions were made hut h
ave not vested in the employee.
When calculating the number of years of employment it is calender years and not twelve month
periods which are counted. As such a person who began employment on December 31, 1990 and
terminated employment on January I, 1991 would be considered to have been employed by her
employer for purposes of this provision, for two years.
If the employee completes Revenue Canada form TD2 "tax deduction waiver in respect of funds
to be transferred" and the amount being rolled into the RRSP or RPP is paid directly by the
employer into the RRSP or RPP no income tax need be deducted from that amount.
C.
ADDmONAL RRSP CONTRIBUTIONS
In addition to the rollover of some or all of the retiring allowance into an RRSP or RPP. the
)
employee may' be eligible to contribute an additional amount to his RRSP based on his normal
contribution limits. Because RRSP deductions which are not used can be carried forward from
one year to the next the cumulative contribution limit in the year employment terminates may be
substantial. Arrangements can be made with Revenue Canada to have this amount contributed
to the RRSP without the necessity of deducting income tax at source.
D.
WITIIHOLDING AT SOURCE
. The employer must deduct and remit income tax on the balance of the retiring allowance
remaining after deducting:
a)
the amount covered by the TD2 (rolled over to the RRSP or RPP) and;
b)
the amount covered by the waiver of deductions at source on any additional
contributions to the RRSP.
, )
Presently the amounts to be withheld and remitted are:
10
a)
10% for payments up to $5,000.00;
b)
20% for payments over $5,000.00 but less than $15,000.00; and
c)
30% for payments over $15,000.00.
From time to time these rates change and therefore you should refer to Section 153(i)(c) of the
act and regulations \03(4) and 103(5).
E.
COUNSELLING SERVICES
Section 6(1 )(a)(iv) of the Act provide that payments by an employer for counselling services in
respect of the re-employment or retirement of an employee are not a taxable benefit to that
employee.
F.
DEATII BENEFIT
A death benefit paid by an employer to the employee's spouse. family or estate is generally
taxable (Section 56(1 )(a)(iii) of the Act), However the definition of death benefit contained in
Section 248(1) of the Act exempts the first $10,000.00 of the death benefit from taxation. Where
the death benefit is received solely by the surviving spouse, up to $10,000.00 of the death benefit
will be exempt from tax. Where the death benefit is received by the surviving spouse and other
individuals the exempt portion of the death benefit will be divided among all the parties with the
surviving spouse being entitled to first claim against the exemption, tip to the amount of the death
benefit which he receives, with the remainder of the exemption being split among the other
beneficiaries, up to the amounts they receive. on a pro rata basis. Where the death benefit is
received by someone other than a surviving spouse the $10,000.00 exemption, up to the amounts
received is pro rated among the recipients.
G.
DEDUCTIBILITY OF LEGAL EXPENSES
Section 60(0.1) of the Act allows the employee to deduct legal expenses incurred by him in
establishing a right to and collecting a retiring allowance. The legal fees are deductible in the
year they are incurred and during the next seven years against the _amount of the retiring
)
11
allowance which is received.
H.
UNEMPWYMENT INSURANCE COMMISSION
The following is an excerpt from the paper "Termination of Employment: Damages" by lE.
Seibel presented at the Continuing Legal Education Employment Law Seminar March 1991.
2.
Liability For U,I.e. Ovewayment
Pursuant to Section 37 of the Unemployment Insurance Act, RS.C. c. U-I, where an employee
received U.I.C. benefits, and then pursuant to lIa labour arbitration award, court judgment or
otherwise" the employer pays remuneration in respect of the same period, the employee is
required to repay an amount equal to the benefits that would not have been paid if that
remuneration had been made at the time she was receiving benefits.
)
Pursuant to Section 38, there is a duty upon an employer who is required pursuant to such
arbitration award, court judgment or otherwise, to pay remuneration to an employee to ascertain
whether an amount would be repayable under Section 37 if the remuneration were paid to the
claimant and, if so, to deduct that amount from the remuneration payable by him to the employee
and remit it to the Receiver General.
Accordingly, whether the employer is ordered by reason of court judgment or arbitration award
to pay damages in respect of a reasonable period of notice, or obligates himself to pay same
pursuant to a settlement of such claim by an employee, the employer has a duty to ascertain the
amount of UI.c. benefits received during the relevant period of notice and deduct and remit
those to the Federal Government, Or to ensure that the employee does so.
The Unemployment Insurance Commission does not allow the deduction therefrom by the
employee of a reasonable amount for legal fees and expenses.
)
NOTE: When contacting the Unemployment
Insuran~e
Commission they will generally refuse
12
to give you any information ahout the former employee. Once they are advised that a payment
)
is being made by the employer to the former employee they will generally become more
cooperative.
VI.
OIANGING TIlE BUSINESS LEGAL ENTITY
From time to time individuals will start a business and operate it, for a period of time, as a
proprietorship or partnership and then determine that the business should be operated through a
corporation,
Section 85(1) of the Act allows a proprietor to transfer his business into a
corporation on a tax deferred basis (Section 85 Rollover) (one of the many uses for a Section 85
Rollover). Section 85(2) applies to the transfer of a business by a partnership into a corporation
on a tax deferred basis (Section 85 Rollover). For the most part whether it is proprietorship
assets or partnership assets which are being transferred the rules are the same.
The following is a brief description of some of the relevant provisions applicable to a section 85
rollover. It is by no means a complete analysis and is intended only as an introduction to the
area. Before undertaking a section 85 rollover the solicitor should review section 85 of the Act
along with some of the related sections and review one of the texts on this subject.
A.
ELlGmLE PROPERTY
The types of property which can be transferred into a corporation pursuant to Section 85 include:
(a)
capital property (eg. machinery, equipment, motor vehicles. land and buildings);
(b)
resource properties;
(c)
eligible capital property (eg. goodwill), farming quotas etc.;
(d)
inventory (other than real property, an interest in real property or an option in
respect of real property).
B.
PUROIASER
The purchaser under a Section 85 rollover must be a "Taxable Canadian Corporation". Section
89(1) of the Act defines Taxable Canadian Corporation and Canadian Corporation. Basically a
)
\3
Taxable Corporation is one that is incorporated under the laws of Canada or a Province of
Canada and is not exempt from income tax.
C.
CONSIDERATION
Under a Section 85 rollover, the vendor must receive consideration for the sale that includes
shares of the capital stock of the purchaser corporation. As well, the total consideration received
by the vendor (shares and non-share consideration) must be equal to the fair market value of the
property transferred to the corporation.
If the vendor is the only shareholder in the corporation, common shares could be issued to her.
However, where there are other shareholders in the corporation, if common shares are issued to
the vendor, a benefit may be conferred upon the other shareholders. The vendor would be taxable
on the amount of the benefit (section 85(1)(e.2) of the Act).
)
To avoid the "benefit" issue, the shares used in a section 85 rollover are usually preferred shares
which are both redeemable (at the option of the corporation) and retractable (redeemable at the
option of the vendor). The retraction feature is important for purposes of maintaining the value
attached to the shares.
D.
PRICE ADJUSTMENT CLAUSE
Most section 85 rollovers are "non-arms length" transactions. As such, the entire transaction.
including the values attached to the assets being sold, can be reviewed by Revenue Canada. To
ensure that the sale to the corporation receives the tax treatment which the parties intended, all
section 85 rollover agreements should contain a "price adjustment clause".
For example, bare land is rolled into the corporation having a cost of $5,000 and a fair market
value of $12,000. The parties agree that the vendor should have no tax to pay on this sale. The
parties elect that the sale proceeds will be $5,000. The vendor receives, on the rollover, a
promissory note for $5,000 and shares having a value of $7,000. Revenue Canada later
determines that the land was worth $15.000 and not $12,000. The vendor and the purchaser
14
agree with this new value. Without a price adjustment clause, the vendor would now be taxable
on $3,000 of capital gains. Based on the original intention of the parties, this is not acceptable.
Relying of the price adjustment clause the parties would file an amended section 85 election and
issue $3,000 more shares to the vendor. In doing this the tax treatment which the vendor and the
purchaser initially agreed upon can be restored.
E.
JOINT ELECTION
To qualify as a Section 85 rollover, the vendor and purchaser must file a joint election (T2057)
In that election they choose the sale price applicable to the assets being transferred. The election
must be filed no later than the day which the vendor and purchaser file their income tax returns.
When those tax returns are due on different days, the election must be filed on the eartier of
those days.
F.
PAID UP CAPITAL
Normally the amount added to the paid up capital account (income tax term) or stated capital
account (corporate law term) for a class of shares on issuance of those shares is equal to the
consideration received by the corporation for the issuance of those shares. This is a requirement
of Section 26(1.1) of The Business Corporations Act. However, in certain cases, section 26(1.2)
of The Business COfllorations Act permits the addition of less than the full amount of the
consideration received by the corporation.
One of these cases is where a 85 rollover has
occurred.
For income tax purposes, when a share is redeemed by the corporation any amount which the
shareholder receives from the corporation in excess of the paid up capital is a deemed dividend.
Also, where the adjusted cost base of a share is less than the paid up capital for that share the
difference between the two is a capital gain.
For example, the paid up capital of the share is $1 and the shareholders adjusted cost base for
that share is $0.00. On a redemption of that share for $1 there is no deemed dividend. However
)
15
there is a $1 capital gain. If that same share is redeemed for $}O, there is a $9 deemed dividend
along with the $1 capital gain.
For a few years taxpayers and their advisors played around with these rules. By having a low
paid up capital on the rollover, most of the deemed dividend could be converted into a capital
gain. Section 85(2.1) of the Act put a stop to this.
Regardless of the amount the parties add to the paid up capital account, under section 85(2.1) of
the act, the amount is ground down to be equal to the difference between the value of the nonshare consideration and the elected amount aforementioned.
G,
MECHANICS OF A SECTION 85 ROLLOVER
Let us assume that a proprietor owns the following assets and wishes to transfer them to a
corporation which they are about to incorporate.
)
Adjusted
Cost Base
Fair Market
Value
(ACB)
Undepreciated
Capital Cost
Recapture of Capital Gain
Depreciation
(UCC)
Land
$ 80,000
$320,000
N/A
N/A
$240,000
Buildings
$ 75,000
$160,000
$50,000
$25,000
$ 85,000
Equipment
~150,OOO
~
90,000
$40,000
$50,000
N/A
Total
$305,000
$570,000
$90,000
$325,000
$ 75,000
Taxable
Income
N/A
N/A
N/A
$243,750
$75,000
If this proprietor sold these assets individually the sale would create the following taxable
lOcome:
\
)
(a)
on the sale of the land there would be a capital gain of $240,000.00 with no
recapture of depreciation (no depreciation may be claimed regarding land).
(b)
though capital cost allowance (depreciation) has been claimed on the buildings
16
over the years, rather than the buildings declining in value in accordance with t
he depreciation claimed, the buildings have increased in value. On a sale of th
e building the depreciation claimed over the years (ACB $75,000.00 minus UC
C $50,000.00 = $25,000.00) is taxable income. As well the buildings are wort
h $85,000.00 more than their adjusted cost base and as such there is an $85,00
0.00 capital gain as well.
(c)
the equipment has been depreciated down to a value of $40,000.00. However, t
he fair market value of the equipment is $90,000.00. As such there is recapture
of capital cost allowance of $50,000.00.
In this example the proprietor, on an outright sale, would have taxable income of $318,750.00
being $75,000.00 of recapture of capital cost allowance and $243,750.00 in taxable capital gains
(75% of the capital gain of $325,000.00).
For nonMdepreciable property Section 85 allows the vendor and purchaser to choose a sale price
for income tax purposes any where between the adjusted cost base and the fair market value of
the asset. For depreciable assets Section 85 allows the vendor and purchaser to choose a sale
price for income tax purposes any where between the undepreciated capital cost (book value) and
the fair market value of the asset. The elected amount becomes the vendors sale proceeds as
well as the purchasers adjusted cost base.
In the aforementioned example if the proprietor wished to defer all taxation on the sale of t}tese
assets to her corporation she and her corporation would elect to have proceeds of disposition on
the sale assets as follows:
(a)
(b)
(c)
(d)
land - adjusted cost base - $80,000.00;
buildings - undepreciated capital cost - $50,000.00;
equipment - undepreciated capital cost - $40,000.00
Tot~1 - $170,000.00.
In this case the consideration that the vendor would receive on the sale of these assets
corporation would be:
1()
her
(a)
cash, promissory note or other debt instrument for the elected amount of
$170,000.00 which she can receive tax free;
(b)
shares of her corporation for the difference between the fair market val ue of the
assets sold and the elected amount ($570,000.00 minus $170,000.00 ~
$400,000.00).
Because the vendor and purchaser have elected to have the sale take place for income tax
purposes on the basis of $170,000.00 of sale proceeds, the cost to the vendor of the $400,000 of
shares is zero. As well. on the balance sheet the stated capital account for these shares will have
)
17
a value of zero (the difference between the elected amount and the value of the
consideration is zero).
non~share
Should the vendor sell these shares to a third party she will have a capital gain. If the sale price
is $400,000.00 she will have a capital gain of $400,000.00 and a taxable capi,tal gain of
$300,000.00. Ifher corporation redeems the shares for $400,000.00 she will be deemed to have
received dividends of $400,000.00 (not a capital gain) and be taxable on that dividend income
(Section 84(3) of the Act).
From the point of view of the purchaser corporation it now owns the land building and
equipment. In accordance with the joint election filed. the corporations adjusted cost base for
the land is $80,000.00. Regarding the equipment and buildings, the corporation will been deemed
to have acquired those assets for the vendors adjusted cost base ($75,000.00 and $150,000.00
respectively) and to have claimed capital cost allowance of $25,000.00 on the building and
$110,000.00 on the equipment leaving the corporation with undepreciated capital cost on the
building of $50,000.00 and undepreciated capital cost on the equipment of $40,000.00.
If at some time in the future the corporation sells the land for $320,000,00 it will realize a capital
gain of $240,000,00. If the corporation claimed no depreciation on the buildings or equipment
and sold the building at some time in the future for $160,000.00 the corporation would have
)
recapture of capital cost allowance of $25,000.00 and a capital gain of $85,000.00. If the
equipment were sold for $90,000,00, the corporation would have recapture of depreciation of
$50,000,00 and no capital gain.
From this example it is clear that double taxation can occur when a Section 85 rollover is
utilized:
(a)
(b)
first when the original vendor sells her shares; and
secondly when the corporation sells the assets which it acquired,
Generally clients accepted this double taxation because the immediate postponement of taxes
payable on the sale of assets to the corporation is a greater benefit than the potential future
double taxation,
H.
GST AND ROLWVERS
The normal GST rules apply to a Section 85 rollover with the exception of what dollar amount
the GST is applicable to. Any GST consequences will be based on the elected amounts set out
in the joint election and not the fair market value of the assets transferred from the vendor to the
purchaser corporation,
,
)
18
Footnotes
1.
Recapture of capital cost allowance.
An asset is acquired for $30,000. Over the years, capital cost allowance (depreciation) is claimed
regarding ownership and use of the asset totalling $15,000. The asset is eventually sold for
$20,000.
In this example, the asset was sold for $5,000 more than it was depreciated down to. Hence it
was over depreciated. This $5,000 is taxable income in the year the asset is sold as "recapture
of capital cost allowance.
2.
Recapture of capital cost on a lease.
$10,000
Option price
Deemed Cost
Lesser of
Fair market value
$30,000
Aggregate of all expenditures
made on the lease including
$25,000
the option price
Deemed Cost is
$25,000
Capital cost allowance deemed to be taken
$15,000
Undepreciated capital cost
$10,000
If this asset is sold a few months later for $30,000:
Proceeds of sale
$30,000
Deemed cost
$25,000
Undepreciated capital cost
$10,000
Recapture of capital cost allowance
($25,000 - $10,000
$15,000
Capital gain
($30,000 - $25,000)
$5,000
)
.+M
"evenue
Canada
"uvCn~
REQUEST BY A NON·RESIDENT OF CANADA FOR A CERTIFICATE
OF COMPLIANCE RELATED TO THE
DISPOSITION OFTAXABlE CANADIAN PROPERTY
Canada
FOIIISO by a non'(OSlden! 01 Canada 10 provide noilCO 01 (8) Ihe d,sposition 01, or (b)lhc proposed disPosilion or, cerlain lex"bl" Caned'8/> pr~p~rly.
Taxsble COllad/all properly Is propllrly described on paragrapllllS( I )(b) o! (ho I/leomo Tax Act.
• For inrormalion cor.ceming residency status ill Canada, lefOI 10 the cu"en\ release ollnterprelalion Bulletin IT·221, De/ermina/ion 01 an IndJVjdual's
Reskhlllcy SretU$, or conlee! the International Tax SeNices Oflioo at 952·3741 (calls [rom wilhln Iho Ollawa area). 1·800·267·5177 (calls hom other
areas In Canada and lho Uniled Staales) or 613-952·3741 (calls hom oulslde Canada and the United Slates). We aCCGpt collect calls Irom oUIside
Canada and tha United States.
Copies 1104 ollhls reQuest must be lifoo at the Tax SelVices OUice lortha area in which the properly is tocated .
• The notice lor a dIsposItion under subsection 116(3) must be sent by regIstered mall not later than 10 days alter Iha date of dlspDslUon.
Check ""
ur ose lor this nolice
0
0
Proposed disposition: attach s copy ollhe oller to purChase.
Completed disposition: alloch a copy of tha agreement 01 sate and the slatement 01 adjuslmenls or a copy 01 tho filed T2057 Or T2058 eleclion lorms
andlhe Iranafer agreement where a secllon 85 eloclion is applicable.
0
Gins 01 properly inter·vivos: elloch documenlalion to supporllair marl<et value.
Provide lull address Including as applicable slreet address. post o!fice 00>. city. slate, country and mait code.
(ReIer to Item 5 on the reverseol copy 510r delalls collCerning lhe requested idenlilicalion numbers.)
Las,,,.... or OO<l-I_or Io<WI
0" ••
F.,I """'. & rr;,,", 01 """, ....... (1)<'''1
I r I
",... or O<b." 01 notI-, ....,.or
0" ••1
bJlh
-,
tc......oatlj So¢>I '''''''''''' _
1I<>n-<. ,;;00,.,. ,,,,,•.,,,,,,.
-...----...
J>oroonlO coot..::Ilo< hIormat«l -
Name _ _ '"
"",,"om on.>Oo
"~llrll
I I
.. " "
Co<pof.""" or 8tl$"",.. Ae<ovnI
ToI.pI>ono
_
1"-
I. Have you previouSly tiled a T2062 or T2062A In the CUlrent t;lal~nr;t~r y~r"1
.. III<nt.I<oGon_
DYES
oNO
DYES
0"
DYES
0""
II 'YES', speclty the Tax Services Ollice(sl where Ihe l8quest(s) were
flied andlndlcale tho name and addless 0 the purchase/Is).
2. Is Ihe disposition subjoct to an eleclion under section 657
II "YES", indio;;ate the date 01 filing the smlon 85 alecHon 101Jll and
the Tax Services Oflice where the elecUon form was flied.
3. Do you hold or contemplate holding a morlgage as a lesult ollhe disposition?
4. Have you received any locoma, Including renls. royalliesor lease paymenlS, from the property?
YES,!llCOme was rectlived Irom the properly (complele the following).
o
)
0
Non-resldentla>c was w~hheld.
Indicale name and addless 01 person who withheld the tax
Non-resident lax WIlS nol w~hheld.
Specify lha perioo{s) llIat Income was received Irom the property
NO, Income was nol received hom Ihe lXoperiy.
0
0
'"
(<Ioy.1IIOIMII. r<.vJ
5. 00 you have any ouls18nding balances iOilaxas, including Income Or excise taxes, custom duties, or
theGoodlI & Services Tax (GSn?
II 'YES', specify Ihe iden~1ication or account numoo/(s) .elated to the outstanding balance 100lflXes.
(Anooh _.10" ........ 11>01
"'"""10 ..........,,1.) orI['OUlrcomo.)
(<Ioy.«.<oNh.rel<!
DYES
0""
6. Indicate when lind where you las! filed a canadian income lax relurn, II applicable:
Year
City
Province
7. Is the disposition 10 a person by way 01 gill of Ploperiy Inter·vi'los Or 10 a persOll with whom you Bre 001
DYES
0""
dealing at arm's lenglh?
If 'YES· and the disposition Is at less than fair marker value enler the lair market value at the Ume of disposition In Column (4) below.
PARTICULARS OF PROPERTY
'"
'"
0"0'"
P<opM«Io. ..
"
'"
v,...",..,
00...-..1101« .. 10m ~ on
f.~_odorAcO ... ,.",......
~OOIe
1IIo'......... oIC<w~
or P<_oIlXt;>osI6on
.'Diw>,;r"",
,
,
'"
""',.
Coml...
N.1 Ooino, (lo")
(1900 olld 5ub.<equenl yea,.. 33 1/3%)
'"
a..,"'tloul
,
,,
C%Jn1I11')
L... CoIomn (51
USE A SEPARATE LINE FOR EACH TYPE OF PROPERTY-ATTACH A SCHEOULE IF SPACE IS NOT SUFFICIENT
Ailachmenls: The lollowlog. 11 applicable, mustaCCGmpany Ih~ request Chock ("") which have been attached.
0
0
0
0
0
0
/
I
'.
o
o
Oller to Purchase or Purchasa Agreemenl.
Cheque Or ll1OIleyorder payable to the ReC8tver Genem\.
Sales Agreement, Statement 01 Adjustments or Transfer Agreemenl.
Evidence lhat security has bean plovided.
Calculation of Adjusted Cost Base.
A T2062A whlctJ is beTog flied simultaneously wilh tlle T2002.
Copy 01 $Bellon 85 elocHon form T2057 Or 12058.
SChedule{s) where space Is IMulliclsn!.
List of name and addresses 01 all members where the property Is held as Joint tenancy, tenallCy·in-common or co-ownership.
Doc\JmenlalIOfI 10 support lair ma*-el valuo ill respect of a sec\ion 85 eleclioo, a gi~ inler·vi-los 01 a OIl·arm's length traflSfer alless than fair mari;el value.
CERTIFICATION
,eertlly that the Informalion given on Ihls form Is, 10 the best of my knowledge, COIIBct and complete.
o
o
"'"".....
~"
lS¥>oI\n 01
""""""""pot"'"
lP""""",,,orLcoeI
FOR DEPARTMENTAL USE ONLY
Subsidiary Ledger Account Number
1
1
Amountof payment
form _ablolO 1/10 """"" or 11_ _ 1\0"...,.
1
1
.+.
Revenue
Canada
Re.enu
Canada
;.~"''''~'
REQUEST BY A NON·RESIDENT OF CANADA FOR A CERTIFICATE
Rov.95
OF COMPLIANCE RELATED TO THE DISPOSITION OF CANADIAN RESOURCE PROPERTY,
CANADIAN REAL PROPERTY (OTHER THAN CAPITAL PROPERTY), CANADIAN TIMBER
RESOURCE PROPERTY ANDIOR DEPRECIABLE TAXABLE CANAOIAN PROPERTY
• For use by a non'losidenl 01 Canada 10 plo"Kle notice 01 (a) the disposiUon 01, or (b) tho proposc<l dIsposition 01 ·Canadian rosource property, Canadian
real ploper1y (olhorlhancapilal plopef1y), CanadIan limber I9S(lUfca plOJl<!l1y andlOi depreciable laxable Canadian property".
For mformation concemln!/Iosidency status in Canada, raler 10 tho Ctllfonl .elease 01 Interpretation Bulletin 1T·221, Delermination %n/ndividua!'s
R9s;dencySlalus, Or conlactthe tntemational Tax Services Ollice al 952-3141 (calls Irom wil~ln tha Otl~wa area), t-800·267·5111 (call hom other areas
in Canada and the Unlled Siales) or 6t3·952-3141 (callslrom oulsida Canada and Ihe Uniled Stales). We ae<;epl collect calls hom oulside Canada and
Ihe Un~ed Siaies.
• Copies 110 4 ollhis request must bellied at the Tax Services Ollice lor the area In which the property is k>caled.
• ThD nOLlctllor a dl5posliion under subsection 118(3) mual be sent by reglslered mall not later than 10 days eller Ihe date 01 dlsposlllon.
Proposed disposlllon: aUach a copy 01 the ollel to puraha~~~ 1-') purpose lor Ihls nollce
Completed disposition: attach a copy 01 the agreement 01 sale and slatement 01 adJuslmenls or a copy oltha
and the trsoslel agreoment w~ere a soclion 85 aleclion is applK:able.
Oills 01 propelly Inler·vivos: attach documentation 10 support lalrmall<el value.
0
0
0
,,1"" T2057 Or T2058 election lorms
Provide lull addross Including as applicable streel address, post ollic;e box, ~ity, slale, country and mai! wde.
(Reier to item 5 on the revelse 01 copy 5 tor details concarnlng the request"" Identirlcation numbers.)
loll no .... '"
"""",,.'<Ie.. tpoW)
F.., MIllO & ~"'01 ,."............ (p<InO
r
,
o.""'ti""
" I
D"'.'de
,
OfiomCOoM.>
r
" I
IC~SodoJ""'"....,.~"'nll
P,. ...IIO<1l< ... "',.".....lOiIenl
-
/loo-f,,""""~.
P."""'.COO"U<tIo<Wot_ _ I/amoOlldocklr ...
C<!<pO<.bOn'" e...,. .. """"-"I
'""-
Pudlau<_Il..... oI>IIockIr ...
r
oltphono
f'l.<d",u ..
kIo'-"""_
1. Have you previously Iii"" a T2062A or T2062 In Ihe cunent calendar year?
DYES
0'0
DYES
0'0
DYES
0,0
If 'YES', spocify the TIllI Services Olfico[s) whale Iho requosl[S) WIlle
moo and indicate the nama end address 01 the purchaser!s).
2. Is the diSPOSition subject to en eleClion undersecUon 851
II'YES', indicate the data 01 liling the section 85 elecUon lorm 8nd the
Tax ServicesOlliCe wl>era the election lorm was filed.
3. 00 you hold 0/ contemplata holding B mortgage as a result 01 the disposition?
4. Have you r9C<llved soy income, Including renls, royalties or lease payments, from the Pl"opelly?
YES, income was received from the property (romplele the lollowlng).
o
0
Non·resldentlax has been d""ucled.
Indlcale name and address 01 person who withheld tho tax
Non·residentlax has nol been deducl"".
to
SpecUy Ihe perlod(s) thotlncome was received Irom the Pl"operty
yo.,)
NO,
Income
was
not
received
Ilomlhe
property.
0
5. 00 you have any outstanding balances lor taxes, InclLKling Income 01 excise taxes, custom duUes, or
the Goods &. Serviees Tax (GSn1
II "YES', speoHy the idenUIlcaUon or account number(s) related to lhe ouistandiog balance for taxes.
0
«loy."""'"
(A/IO</IO"IOOoIIe ... " ....... II\a,
tda)'.""""'yoor)
_ , . """""'1'1 "'11''''' """"0.)
0",
DYes
8.lrKllcale when arKIwhereyou last med a Canadian Income lax return, il applicable;
City
Province
Yoo'
7. Is lhO disposition 10 a palson by way 01 gift 01 property Inler_vlvos or 10 B person wHh whom you are not deating al arm's fenglh?O YES
IJ 'YES' and the disposition Is at less than fair mall<el value enler the fair malllet value at the lime of disposition In Column (4) below.
0'0
• COMPLETE THE APPLICABLE INFORMATION FOR DISPOSITION(S) OF REAL PROPERTY (OTHER THAN CAP)TAL PROPERTY) AND
RECAPTURE ON DISPOSITION OF DEPRECIABLE PROPERTY AND/OR TIMBER RESOURCE PROPERTY.
• USE A SEPARATE LINE FOR EACH TYPE OF PROPERTY .ATTACH A SCHEDULE IF SPACE IS NOT SUFFICIENT.
OF TAX FOR RESOURCE PROPERTIES ON T2062A SCHEDULE t.
• CALCULATE THE PAYMENT REQUIRED ON ACCOUNTPARTICULARS
OF PROPERTY
'"
_,_[l,,,
0,,,,,,
'"
p_o.,.
"
V,odor.
00"""""",·R" .. ..,hm3",,
1hO' ..... ""'COFi~
"'~
'"
'"
, -, ,
'"
'-'.:.:...~Coo<~CoIO"'Co>
~'_"'''W''''''''''''_
.... ~ ...."....·III"'''' .... ~''''''
~"'Cosr...."....·III"''''
,
",,,,,,,,,,,"(:q,s
lnoom. or (Loss)
Payment required per 11>0 epplicabl. Part 1Fode,.1 Tax Rale IFO/ r&sO\llte proporty. <>blain amounllrom Form T2062A Sdledule 1)
'''''''''' . . . (1.. . . )
CoIuoM(')
•
,
•
I.."~l!)
USE A SEPARATE LINE FOR EACH TYPE OF PROPERTY- ATTACH ASCHEDULE IF SPACE IS NOT SUFFICIENT
Attachments: The followIng, lIapplleable, mU$1 accompanylhls raquast. Check (0') which have been altached.
Cheque or money older payable 10 the Receiver General.
0 Ollarto Purchase or Purchase Agreement.
Evidence that socurity has been provlded.
0 Sales Agreemenl, Sialemeni 01 Adjustmenls or Transfer Agreement.
A T2062 which is being filed 5imuUsneously wUh !he T2062A.
0 Calculation 01 Adjusted Cost Base.
.T2062A Schedule I.
0 Copy 01 soclion 85 elocllon form T21157 or T21158.
0 LiSI 01 name and addresses 01 all membelS where Ihe Pl"opelly Is held as Joint tenanC)', tenancy·ln..:ommon or (»(Iwnarship.
Oocumentation 10 suppoll lair market value In respect 01 a seclion 85 elocllon, a gift Inler....ivos or a non-arm'$ length transl81 at tess than fair
0 mall<al
value.
o
o
o
o
,
)
CERTIFICATION
, cellily lhatlhe Inlormation given on Ihis lorm Is, 10 the best 01 my knowledge, COIrect and romplele.
"
."
~-
SubSidiary Ledger Aocount Number
iP_"'._l
I~ •• ' oMNooO,ec1po<OOOI
FOR DEPARTMENTAL USE ONLY
I
I
f""""""j>Ial>'tlOlhO"""'''''''N,_R ..."",
Amount 01 Payment
I
I
1+1
Revenue Canada
Customs, Excise and Taxation
Revenu Canada
Accise, Douanes et Impot
002
Rev 93
TAX DEDUCTION WAIVER IN RESPECT OF FUNDS TO BE TRANSFERRED
Who can use this form?
this form to waive tax deductions il you direclly uans/er:
a rellnng allowance from yOUI employer to the trustee's) or a registered pens,on plan (APP), or to the 'Issuer" of a registered retirement savings plan (RASP). within the terms
or paragraph 6OU· 1) of the Income Tax Act. 01
a periodic payment from the trustee{s) of an RPP or a deferred profit sharing plan (OPSP) to the trustee(s) 01 an RRSP. within the terms and limitations 01 paragraph 601).2) of
the Income Tax Act.
y~ caouse
.
1
_
Individuals who ale reSidents 01 Canada at the lime they receive Qualily.n9 income. as outlined above. can use Ihis form. Non·reSldents have 10 usa Form NRTA I. Aulhofl.-al,on fOI
Non·ReSldefll Tax Exempllon.
Under cerlaln circumSlances. you may have to pay 'minimum lax' when you file youl Income lax relurn for the year you made Ihe direct transler. You are allowed a basic exeMpt
amount of 540.000 for this lax when you celculale your taxable incoma. If the \otal of your taxable Income. the amoum you deduCl on your income tax relurn lor Ihe transfer 01 your
retlrmg allowance 10 your RPP or RRSP, the transler 01 periodic RPP or DPSP income to a spousal RASP. Ihe 25~Q non·taxable pari 01 your capilal gain. and ceriein other deoucllOns
is more than S40.000. you may have 10 pay this lax. See line 400 in Ihe General Tax Guide lor more details on minimum lax.
Instructions
II you wanllo weive tax deduct,ons. you have to fill oul a separate waiver for each plan. II you make the Irangfer Ihrough periOdiC paymenlS. you only have to lill out a waiver when YOli
make the firSltrangler In Ihe series of paymenlS
The lex deduction waiver does not apply when you want to Iransfer an amount to an account in Ihe name of anolher person. unless you transler tha amount to a spousal RRSP under
paragraph 60ij.2) 01 the Income Tax ACI.
One copy of Ihls waiver. properly 1IIIed oul and s,gned by both you and the transferor of Ihe funds. constilutes aulhonty for nol wilhholdmg lax. The transferor has 10 keep completed
T02 lorms so our ollicers can examine Ihem upon request.
On Ihis lorm. 'Iransleror' means the IfUBtee(s) ollhe plan making Ihe Iransler. 01 an employer paying a retiring allowance.
'Trustee(s)' includes admlniSifaIOr(S) and. in the case of an insured pension ptan. the insurer
tT·337.
i ill I
Details of transfer
)
Amount
IS
~--------'-'
Is this a single transfer?
Yes
0
No
D
If "NO", indicate the frequency of the transfer
From:
To:
Name 01 plan (il applicable)
Name of plan
Name(s) of Irustee(s) (il applicabte)
Name(s) 01 truslee(s) or 'Issuer'
Name 01 employer or payer
Address of trustee{s) or 'Issuer'
Regislration number
Policy number (if an Insured ptan)
Description of funds: (check applicable box below)
o
o
o
Description of plan: (check applicable box below)
retiring allowance
o
registered pension plan (RPP)
superannuation or pension benefit
D
registered retirement savings plan (RASP)
income from deferred profit sharing plan (DPSP)
Certification
I hereby certify that the trustee{s) or "issuer" of the receiving plan has advised me that the plan has been registered (or that the "issuer" of
the recipient retirement savings plan will apply to register the plan) in accordance with the provisions of the Income Tax Acl.
Dale
Signalure of Individual
.A hereby certify that each transfer of the amount stated above will be made directly to the trustee(s) or "issuer" of the receiving plans. and
that the amount or total of the amounts, as applicable, transferred each year will be reported, on form T4A Supplementary.
Date
Signa lure of Transferor (Truslee of Plan. Employel 01 Payer)
.+.
Revenu Canada
Accise, Douanes et Impo!
Revenue Canada
Customs, Excise and Taxation
TO,
Rev. 93
DISPENSE DE AETENIA L'IMPOT A L'EGAAD DES TAANSFERTS DE FONDS
Qui paut ullliser celte formule?
VallS pouvez ulrhser ceUe formula pour (anoncer RUX 1&lenues d'imp61 si valiS ertecluez Ie transfer! direct de fun des monlants suivants'
• une allocation de lelraite valsoe par volle amplQyeur au(x) j,ducia,re(s) d'un fegime de pension agree (APA) ou a r"amet!eur» (I'un regime anregislro d'opargne-felreite I' ,.:.t:R)
en vertu de ,'elinoa 60 j.l) de la Loi de l'imp6t sur Ie revenu:
• un paiemenl periodlque verse par 103(5) I,duciall"e(s) d'un APA ou (fun regime de participation differee aux benefices (APDS) au(x) Iiduciaire(s) d'un REER en vertu des
dispositions at des resilictioos de ralinea 60 1.2) de la Lui de nmp6/ sur fa revenu.
Les parl,culiors qUl sont des residents du Cenada au moment ou ils le~oiyent un reyanu admissibte peuYent ut,liser celie lormulo. conlofmement au paragraphs ci·dessus. Les
non·fo:!sidents do,yant utitJser la lormule NATAl. Au/orisa/ion d·exoneration dimPOl de non·residents.
Dans certaines circonstances. vous poufriez deVOir payer un .. impOt minimum" 100sque vous produisez une declaration de fflvenus pour I'annee IIlequelle vous avez ellectue un
lIansfert direcl. Vous avez droit il une exempl,on de base de 40 000 S lorsque vous calculez votre revenu ,mposable aux hns de l'imp61 minimum. Si Ie lotal de votre revenu
imposabta. du montanl que vous deduisez pour Ie translart de Yotre allocalion de relraite II 'loire APA au II 'loire AEEA. du 1tanslert de paiemenlS periO<iiques d·un APA au d·un
APOB au AEEA de 'loire conjOint. de 25 pour tOO do la partie non imposable da 'lOS gains en cap·ltal et de certaines autres deduclions eSI superieur 40 000 S. vous pourriez devo"
payer cet impiit. Pour plus de renseignemenls sur I"imp61 millJmum. reportez·vous ilia ligne 400 dU Guide d·,mp61 g(mural.
a
tnstrucllons
S, vous voulez ranoncer aux retenues d·impOt. yous deYel remplir une lOlmulede renoncianon pour chaque fegime. SI vous laites Ie translert sous lOffTIe de paiements p,Modiques.
vous dovel seulement remplir una formule de renonclallon au moment du premier I/ansferl dela serie de paiamenls.
La lormule de renoncia1<on eux retenues d'impiit ne s·applique pas lorsque vOus voulel !ral"lsMrer on monlant dans un compte au nom d·une aut/a personne.lI molns que vous
!Ians!erialle montan! II un AEER de 'lOire conjOint an vertu de I'ar,nea 60 j.2) de la Loi de l"imp61 sur Ie revenu.
Un exemplaire de ceUe formule. dument remphe el signee par vous elle cedant des lands. conslilue I'autorisalion da ne pas ratenir I"Imp61. Le cedant doit conserver les formulas TD2
rampties. afin que nos agents puissenttes axamlner sur demande.
d~ment
Dans cetle formuie. Ie terme .. cedant .. designa Ie ou les f'duciaires du regime ef!ecluantle !ransfert ou lout employaur versant one allocation de relraite. La lerme "liduciairets)"
comprend la au les admllllstrataurs at. dans Ie cas d·un regime de pension assure, I'assuraur.
Pour plus de renseignements. reporlez·vous
a. la version courante da la Clrculaira d·informalion 79·6 ou Ie Bulletin d·inlerpretaMn IT ·337.
PH!nom usuel el inlt,ales
INom de/amille (en majuscules)
Numero d'assurance sociale
Adresse
Detail du transfert
Montant
Sj
Est-ce un translert unique?
Qui
0
Non
0
vous avez fllpOildu "non .. , indiquez)a frequence du transferlc'______--,-__________________________
De:
Au:
Nom du regime (si appticable)
------------CNCocm~d"COreCgCim=.,----------
Num6/O d'agr6ment
Nom(s) du{des) fiduciai/e{s) ou de I" "emellour"
Nom(s) du(des) flduciairets) (si applicable)
Nom dal'employeur ou du payeur
Adrease du{des) fiduciairals) 00 de 1' .. emeUaur ..
No de polica (s·il s·agLt d·un regime assure)
Designature des londs: (Cocher ta case appropriee ci-dessous)
o
o
o
Designation du regime: (Cochez la case appropriee ci-dessous)
Allocation de retraite
o
Regime de pension agree (RPA)
Prestations de retraite ou d'autres pensions
D
Regime enregistra d'epargne-retraite (REER)
Aevenu provenant d·un leglme de partlcipallOn d,ffli"i& aux befi@llCesCAPOB)
Attestation
J'alleste par la prasente avoir ete inlorme par le(s) iiduciaire(s) ou I'«amelteur» du regime auquelle translert est destine que ce regime a
eta agree (ou que )'«emeUeur» du regime d'epargne-retraite auquet les fonds seront transleres presentera une demande d'agrement du
regime) conlormement aux dispositions de la Loi de /'impol sur Ie revenu.
Dale
Signature du partlculiel
J'alleste par la presente que chaque transferl du montant mentionne cj·dessus sera eflectue directement au(x) fiduciaire(s) ou a
I'«emelteur» du regime auquelle transfert est destine et que Ie montant ou Ie total des montants, selon Ie cas, transfere chaque annee
sera declare sur une formule T4A Supplemenl8ire.
Date
Signature du cedant (fiducialre du reQime. emolov~lJr nu
M'''''''\
)
....
• ,.,...
Revenue
Canada
Revenu
Canada
ELECTION ON DISPOSITION OF PROPERTY BY A TAXPAYER TO A TAXABLE CANADIAN
CORPORATION
,
FOR DEPARTMENTAL USE ONL.Y
'], use by a taxpayer and a taxable Canadian corporation to jointly elect under subsection 85(1) where
taxpayer has disposed of eligible property within the meaning of subseclion 85(1.1) to the corporation
_", d has received as consideration, shares of any class In thai corporatlon .
• File the completed election form and related schedules (il any) as follows:
(1) one copy by the transferor. Where Iwo or more transferors elect regarding the transfer of the same
property (co-ownership) or two or more members of the Same partnership elect with respect to the
transfer of their partnership interests, one transleror designated for the purpose should lile
simultaneously one copy lor each Iransleror, along wllh a list of all transferors electing. This list
should contain Ihe address and social Insurance number or account number 01 each transferor.
(2) on or belore the earlier dale on which anyone ollhe panies to the election Is required to lile an
Income tax relum lor the laxation year in which the transaclion occured taking into consideration any
eleclion under subsection 99(2). (Due Date).
(3) allhe Tax Centre where the transferor's income tax return Is normally filed. Where two or more
co-owners or members or a pannership relerred to in (1) above elect, the elections will be processed
in bulk and should be filed at the Tax Centrs of the transleree.
(4) Separate from any tax returns (you may put it in the same envelope with a return, but do notlnser!
In nor attach to the relum).
• Sections and subsections mentioned on this lorm are those of the Income Tax Act.
Name ot Taxpayer ITranslerOI) (plint)
Sodallnsurance or Corporate Accoont Numbell8usiness Number
Address
Po~lal
I
\,i(l!,le
Tax SelVices Ollice
Taxation Year 01 Taxpayer
For the period
19
to
19.
Names 01 Co-ownerls).l1 any (I'! more lhan one, attach schedule in like detail)
Social Jnsurance Number
A~dress
Postal Code
Name 01 Corporation (Transleree)
Ae<:ounl Number BusIness Number
A!,Idress
Poslal Code
I
Tax Services Office
I
Tax Services OUice
Taxation Year 01 Corporation
FOlthe period
19
to
19
Name 01 Person 10 Contact 101 Additione"nlormalion
Area Code
I
Telephone Number
PENALTY FOR LATE FILED AND AMENDED ELECTIONS
An eleclion that is filed atter its due date or an amended election will be subject to a late filing penally in
accordance with subsection 85(8).
Calculation of lale filing penally;
Fair markel value of property transferred.
Less: Agreed amount. .
. .
.. . . . . . . . . , ....
. . . . . . . . . . . , .. . ....
Oifference .. .
.
. .
. . . . . . . . . . , .... .........
AmountAS
$100.00 X N
....
.
...
FOR DEPARTMENTAL USE ONLY
$
$
A
X 114 X 1 %XN . . . . . . . . . . . . -$
B
.....................• $
C
N is a number representing the sum 01 each month or each perl 01 a month In the period from the due !,late to tho
actual tiling date. Amount C cannot excee!,l 5B.000.OO
I
jate filing penalty Is the lesser of Band C above • . . • . . . • • . . .. $
Make cheque or moneJ order pa~ab1e 10 the Receiver General, if a penalty is payable. Spec1fy "T2057"
on the remittance an Indicate t e taxation year, the name and Socialtnsurance Number (or Account
Number/Business Number illhe transferor is a corporation) of the taxpayer whose account is to be
credited.
Unpaid amounts including late liting pen ames are subject to daily compound Inlerest at a prescribed rale.
Amount enclosed $
DETAILS DES BIENS ADMISSIBLES DISPOSES ET DE LA CONTREPARTIE REC;:UE
Date de la vellto 01,1 du transtert de lous
Jour
Ann~e
Mots
les biens inserils ciodessous:
Biens dont it a
~t6 djslXls~
(BrilV(l descrip1ion 16go10)
Somma
convenue
Autre que des acllens
Actions
Description
Nomb,s al
B·A.
SIB·A;.O,
voir nole 4.
catllgorle
".
,
marl..
T
(Voir nole I)
$
$
~
dllelarer
,
,
Justa veleur
marchande
•gc
Cont,epartie roo;ue
Montenl tI
Umilos relatives ~ la somme cl10isie
Description
Rama/que: Rampl;' un nouveau 12057 lorsque la dale de Ie
vento 01,1 du \ranslert est diU~fente de celle·ci.
Ni~~
:z;
S
$
S
=
DX<ot:
~~~~
.E"'"
<tI
•
~t
(Descfiption 01 cat6gorie preserite)
(Voir note 2)
(Genre)
(Voir note 3)
ffi"i?
0
•E
•
2~
i~
11:
s"
""15",1:>
.u-l
, •0
(Genre)
(CoiH
jndiqu~)
~= ~.S!
_oD
co.
- :!!.'<J.§
(Brbve description Mgata)
••
"5.21
~'~
zeRO
ZIORO
(DesCliption)
g~ol>
(Cout indfqu6)
.
_0
•0
c
)-
0_'
, o'
"iij'S<>
>
§"H"
o
_
~F'J:
'C_"'\?=~~,§."'~
"c c ,
.g l!.~ li
~3~§~
1',";
g
'~
-
S
<7.
'IH!'
Note 1 Prix de base rajusle (assujeUi a rajustement seton Particle 53).
Nole 2 La moindre de la lraclion non amortie du coOl en capital pour lous les biens de la categorie elle coOl du bien.
Note 3 Le moindre de 4/3 x par Ie montant cumulaUf des immobilisalions admissibles ella ceOI du bien. Ulilisez "2,, au lieu de «413» pour les dispositions
ellectuees pendanltes annl!!es d'imposHion commen~nI avanlte fe, juillel1988 dans Ie cas dune soci~le au, pour les dispositions elfecluEles pendanl
les exercices commencant avanlle ler Janvier 1988 dans las auttes cas.
Nole4 DElclarer ce montant comme un gain en capital au comme un revenu, selon Ie cas. De plus, dans Ie cas d'un bien amortissable ou d'une immobirisaUon
admissible, une partie du monlanl pourra eire declaree comme gain en capital et une aulre comme revenu.
Aeportez-vous la derniere version du bulletin d'inlerprelatlon IT-291 pour plus de renseignements sur les immobilisalions et pour des explications au sujel
des IImites.
a
CHOIX ET A T T E S T A T I O N - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
a
Par les presentes, Ie contribuable et la societe font conjointement un choix en vertu du paragraphe 85(1) I'egard des biens indiques, et
attestant que les renselgnements donnes lei et dans taus les documents annexes sont vrais, exacts et complets en autanl qu'ils sachent,
sauf erreur.
-"""""c;;;",;o;;;-;;;;;;c",;;;;;;;;;;;;",~;;;;;;;;;;;;;;;;;""",,,,,,-,"
---.,s,o.g"~.","c,.c.-"c"CgC;.;Og.~.o"c,
.c"c,.c,'.c..Cgc"o-~.o.,o."~"o.c".c--Signalure d~ c;\d~nt dUn cI',igeant aulori.~ ou dUna pe,sonna au\()(;ds'
,u
'"
•
"".,.
'Annele. una copla de t'auto,;saUon
Oats
f'NFORMATION REQUIRED
On the page opposite, liSI, describe and slale the fair malkel value of properties transferred. The description and fair market value of the
consideration received must be shown opposite the related property transferred. Where the property transferred is a partnership interest,
auach a schedule of the calculation of the adjusted cost base. If space on the form Is insullicient, attach schedules In like detail. The
~.-.-'~ of disposition of each depreciable property must be designated. Schedules supporting this designation, documentation relating to
sponses to the questions below, and a brief summary of the method of evaluating the fair market value of each property transferred
need nol be filed with this election but must be retained as they may be requested for examination at a later date.
Is there a written agreement relating to this transfer? ..................... · ............
Is a price adjustment clause involved in respect of any of the properties? (Refer to current Interpretation
Bulletin IT-169 for details) ............. . . . . . . . . . . . . . . . . . . .
· .....
Do any persons other than the taxpayer own or control directly or indirectly any shares of any class of the
transferree? ...... . . . . . .............. . . . . . . . . . . . . . . . . .
Where a non-arm's length intercorporate rollover exists, have all or substantially all (90% or more) of all the
· ...
· ..
properties of the taxpayer been transferred to the corporation? . . . . . . . . · .
Is the taxpayer a non-resident of Canada? . . . . . . . . . . . . . . . . . . . . · .
. ...
.. ·
..
D
D
No
DVes
No
DVes
D
No
DYes
D
D
D
No
No
No
DVes
DYes
DYes
.. · ... . ...
Are any of the properties transferred capital properties? . . . . . . . . . . .
If "Ves",
a) have they been owned continuously since Valualion-Day (V-Day)? . . . . · ............ . . · ..
b) have they been acquired after V-Day in a transacUon considered not to be at arm's length? . . . . · ..
c) since V-Day, has the taxpayer or any person from whom shares were acquired In a
non-arm's length transaction received any subseclion 83(1) dividends with respect
to the shares transferred? (If yes, provide details of amounts and dates received and attach a schedule.)
D
D
No
No
DYes
... D
No
DYes
Is the agreed amount of any of the properties transferred based on an estimate of fair markel value on
V-Day? . . . . . . . . . . . . . . . • . . . . . . . . . . . • . . . . . . . . . . . . . . . .
.
II "Ves" does a formal documented V-Day value report exist? . . . . . . ....................
. D
.. D
No
No
DVes
D
No
DVes
Has an election under subsection 26(7) of the Income Tax Application Rules (Form T2076) been filed by or
on behalf 01 the taxpayer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DYes
DYes
Where shares of the capital slock of a private corporation are included in the property.
dlsposed of, provide the following:
Account Number/Business Number
..2e 01 corporalion
I
[
Paid-up capital 01
shares transferred
$
DESCRIPTION OF SHARES RECEIVED
Number 01 Shares
Transferor Received
Class 01 Shares
Redemplion
Value Per Share
Paid-up Capilal
VOU"llOl
NGrl.-.oUng
Are Shares
Relraclable? •
DyOS
DYes
DYes
DYes
DYes
0"'
0"'
0"
0"'
0"'
- RelraClable meanS redeemable allhe oplion 01 the Holder.
INFORMATIVE N O T E S - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
• Where subsection 85(5.1) applies on the disposition of depreciable propeny, an election under subsection 85(1) cannot be made. Please note, draH
legislation released in April, 1995, proposes to repeal subsection 85(5.1) and replace il by proposed subsection 13(21.2).
• The rules for section 85 elections are complex. Essentiallnformalion Is contained in currenllnformation Circular 76-19 and Interpretation Bulletins IT-169,
IT-172, IT-29t and IT-378.
• For Ihis election to be considered valid, all inlormation areas must be completed and all questions answered. II incomplete, the election will be considered
L invatid and subsequent submissions will be subject to late liling penalty.
'-. ) Where Form T2057 is filed within 3 years aHer its due date the election will be
paid at the time of filing.
dee~ed to ~ave been filed on time. provided an estimate of the penalty is
• An amended election or an election filed beyond three years of the due date may, In certain circumstances, be accepted and deemed 10 have been filed by
the due date, provided an estimate of the penalty described In subsection 85(8) IS paid at the lime of filing the election. In these cases, a written submission
lor cnnfliderallon bv the Minister must be altached saltina Qut the reasons whv the election is amended or late.
RENSEIGNEMENTS EXIGES - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
A la page cl-conlre, enumerez al decrivez les biens Iransillres at indiquez leur juste valeuf marchande. La descripHon al fa juste valeur marchande de la
contrepartie re<;:ue delven! figurer en regard du bien Iransfere. 81 Ie bien translare est una participation dans une societe de personnes, annexez un tableau
du calcul du prix de base rajusle. Faule d'espace sur Ie T2057, joignez des leuilies qui sulvenlla m~me presentalion. Pour cheque bien amOr1issable, iI f.<l~
designer j'ordre de disposiUon. II faut avoir les pieces a I'appul de I'mdre deslgne, les documents (elalils aux (sponses aux questions cj·apras al une b'
)
description de la malhode de caleul de la juste valeur marchande de cheque bien. II n'esl pas necessaire de produire Ici ces documents, mais II laut Ie
conserver pour pouvoir les produire sur demande,
'
0
Noo
DOui
0
Noo
DOui
0
Noo
DOui
D
Non
DOui
D
o Non
Non
DOui
DOui
D
Non
DOui
D
Non
DOui
D
Non
DOui
La somme convenue a I'egard d'un des biens transferes repose-j-ella sur une estimation de la justa valeur marchande au jour
de j'evalualicn? ., .. , .. , .. , , .. _. , ' , , , , , , . , ' , , , . , , _... , ... , , _... , , , , , _, ' . , , . , , _, . , .. , , , , .... , , .. , , , ... , , ,
Si oul, exlsle-HI un rapport offlclel la'isani elal de la valeur au jour de I'evaluation? ', .. , , , , _.. , , , .. , , . , , , , , . _... , , , , ,
D Non
D Non
DOui
DOui
Un choix selon Ie paragraphe 26(7) des Reg/es concernanll'applicalion de I'imptil sur Ie revenu (!ormulaire 12076) a-I-il ete
produit par Ie contribuable ou en son nom? . , , , , ' . , .. , , , __ , , ... , , , ' _, , , , , , .... , . , . , , ' ..... , , , ..... , , ... , , , .. ,
D
DOui
Y a-i-it une entente ecrUe concernant Ie Iranslert?
_.""".,.
L'un des biens est·jj vise par une clause de rajustemeni du prix? (Pour plus de precisions, voir la dernlere version du
bulletin 11-169.) ,." .. ,., .. , .. , .. "'" _.,.'",.,. _, .. " .. ,
.. _.".", _.... " " . _" ... ," _. __ .. ""
Ya·l·iI d'autres personnes Que Ie cont'lbuable Qui deliennent des actions d'une categorie du capital·acHons du cessionnaire ou
Qui exercent sur de telles actions une emprise, directement au Indirectement? ... , _. , , . , , _. _, . , , , _. _.. , , , , , . , , .
S'il Y a roulement entre socIete ayent un lien de dependance, les biens du contribuable ant-its tous au presque tous (au
mains 90 %) ete Irans/eres a la societe? ",. _, , ' ". , , __ .' " " " " .. , " " ' , .. ,',., •.. , .. _, ....... , , ., .... , , ..
Le conlribuable est·jj un non-resident du Canada? ".,"', .... ".," _, , .... , , ' , _, , , . , , ' . , , , , , , . ' , , .. , , , , . , .... ,
Les biens transferes comprennent-ils des Immobilisalions? ' .. , ... " ... , " " , .. - . , .. , , , , . , . , , , , ... , , , , . , , ... , , , , _
Dans I'allirmalive :
a) Les biens ant·its ete delenus sans interruption depuis Ie jour de I'evalualion?
b) Onl-its ele aCQuis apres Ie jour de I'evalualion dans une operation conslderee comme comportant un lien de dependance?
c) Oepuis Ie jour de I'evaluation, Ie contribuabJe ou une autre personne de qui des actions ont ete acquises dans une
operation comportanl un fien de dependance a-II reQJ des dividendes vises par Ie paragraphe 83(1) a regard des actions
transl{)rees? (Dans I'allirmalive, preciser les montants eltes dates et annexer un lableau.) , , , , .. , , .. " ,',., __ . , , , ,.
Non
Si les biens transleres comprennnent des actions du capital·actions d'une societe privee, donner les
renseignements suivants :
Raison sociale de la societe
Numero de compte! numero d'entreprise
Capital verse des
actions transferees
s
DESCRIPTION DES ACTIONS RECUES
Nombre d'aGiionS
CBI~gorie
Valeur de
Jschal par aclion
Valeur tiscale du
capital vers~
Avecou sans
drOll de vole
RacMlabies au or~
dudalenlaur?
DOUi
DNan
Dou,
ONOO
DOUi
DNan
Doul
DNa,.
OOUI
o
Non
rREMARQUES-------------------------------------------------------------,
• lorsQue Ie paragraphe 85(5.1) s'applique a la disposition d'un bien amortlssable, un choix en vertu du paragraphe 85(1) ne peut pas Atre fait. Veuiliez
prendre note, qu'un avanl projet de loi depose en av(1I1995, propose d'abroger Ie paragraphe 85(5,1) et de Ie rem placer par Ie paragraphe 13(21.2)
propose,
I. Les rllgles concernantles choix prevus a J'article 85 sont complexes, La derniere version du circuJaire d'jnformalion 76-19 et des .bulletins d'interpretalion
IT-169, 11-172, 11-291 et 11-378 renlerment les renseignements essenUels a ce st,lJet.
- Pour Que ce choix soit valide, Ie lormulaire, y compris Ie questionnaire, doit Alre rempti, S'II est tncomplel, Ie choix sera considere comme non valide, et
toul choix produil par la suite sera assujelli a une panalila pour production tardive,
• LorsQue Ie lormulaire T2057 est prodult dans· las trois ans apres la date d'ecMance, Ie choix est repute
la panalite applicable est paye sur productlon du choix.
I-
avoir ete exerca a lemps si Ie montent estimatH
Un cholx modilie ou un choix p'roduit plus de trois ans apres la date d'ecMance peul, dans certaines circonstances, Alre accepte el repute avoir ete produit
a temps Sf Ie monlanl eslimat,1 de la pename prevue au ~aragraphe 85(8) est paye sur production du choix, En pareil cas, une laUre expliquanl pourquoi Ie
choix est modUie au lardi! doll Alre SQumlse a I'appreclatlon du Minlslre avec Ie lormulalre,
PARTICULARS OF ELIGIBLE PROPERTY DISPOSED OF AND CONSIDERATION RECEIVED
".
Month
0"
Data 01 ula or IrMster 01 all prepertJes IIsled
below:
.
Nole: FD< properties sold Or 1I30.'e,,,,d on ",neranl dates, usc separate
T20Sl's.
Consideration
P'OIX'Ity Disposed or
)
Elecled AmounllimilS
OUtlip!,on
Fai, Markel
Value
,
A
AmountlO be
Non-sha,"
,.ported B· A
If> 0 s~e nole 4
Oesc~plion
R.~eived
Share
Fair Me"".l
Value
Number
and Class
(See Note I)
(Br;ellegal)
S
rOlf
£ ~ II
AgI ••II
AmouN
S
S
•
S
itw d:
-'!
u"
•
IOesCtiplion and p,eseribed Class)
(See Nole 2)
(Kind)
(See NOle 3)
(KInd)
(COSI Arnoun\}
U
c
•
• 1i
"!
•
:~~
< ••
nu
Ln ...
(Briel legal)
!
""
""
>
jJ
)i.
H
(Oewiptionj
(COSI Amount)
80.
<I)
~c"~
0
00
· !.•0
••
••
~:c"'~
8. o ,E",
-,g
<f}
? _ 1:
"''''!
c
~~ "J~
"'''?'''
E'i8.'"
'g-;5
u
0
<
,~
~
.'"~"
<1
6
Z.
z
Note 1: Adjusted cost base (which Is Subjecllo adjustment per section 53).
Note 2: The lesser of undeprecia!ed capita! cos! 01 all property of lhe class and the cos! 01 the property.
Nole 3: The lesser 014/3 x cumulative eligible capita! and the cos! of the property_ Use "2" instead of "4/3" for disposillons occurring in taxation years
commencing before July 1, 1988, in the case of a corporation or for dispositions occurring in fiscal periods commencing before January 1, 1988, in any
other case.
Note 4: This amount is to be reported either as a capital gain or as income, whichever applies. Also, in the case of depreciable property or eligible capital
property, a portion of the amount may have to be reported as a capital gain while another portion may have to be reported as Income.
Reier to current Interpretation Bulletin IT·291 lor more information on eligible property and an explanation of the limits.
,ELECTION AND CERTIFICATION
.
The taxpayer and corporation hereby joinlly elect under subseclion 85(1) In respect of the property specified, and certify that the information given In this
election, and in any documents allached, is to the best 01 their knowledge, correct and complete.
.
i
.;
Signalure of Tfllnsferor of Aulhorlzed Officer or Aulh<lrized Pe'3on'Allach a copy 01 au\t)orizing agreement
".
Signalu,e of AUlhorized Ollicel of Transferee
Dale
.+.
Revenu
Canada
~~~~d~e
CHOIX RELATIF A LA DISPOSITION DE BIENS PAR UN CONTRIBUABLE EN
FAVEUR D'UNE SOCIETE CANADIENNE IMPOSABLE
• A I'usage d'un contribuabte et d'une socil!itl!i canadienne imposable pour exercer conjoinlemenl un choix
en vertu du paragraphe 85(1), torsque Ie contribuable a dispose, en laveur de la socil!ite, d'un bien
admissible selon la dl!Jlinitlon du paragraphe 85(1,1) et a reltu en contrepanie des aclions d'une categorie
quelconque de celte societe.
• Le lormulaire laisant etat de I'exercice d'un choix dument rempli et, s'iI y a lieu, les pieces connexes
doivent etre produils comme suit:
(1) un exemplaire par Ie cedant (Iorsque deux cedants ou plus lont un choix concernant Ie transfert du
meme bien (coproprietl!i) ou que deux membres ou plus de la meme soch!ie de personnes lont un
choix concernant Ie translen de leurs panicipalions dans la socil!Jtl!i de personnes, un seul cedant,
designe pour la chose, doit produire simultanement un exemplaire pour chaque cl!idant avec une
lisle de tous les cedants quI font Ie cholx concerne, liste ou dolvent ligurer I'adresse et Ie
numero d'as$urance sociale ou numaro de compte de chaque cMant);
(2) au plus tard a la date qui survienlla premiere parmlles dates auxqueUes une des panies au choix
doit produire une dl!iclaralion de revenu pour ,'annee d'imposilion pendantlaquelle la transaction a
eu lieu, compte tenu de tout choix fait en vertu du paragraphe 99(2) (date d'echeance);
(3) au centre liscal OU Ie cedant produit normalement sa declaration de revenus (Iorsque deux
copropriataires ou plus, ou que deux membres au plus d'une societe de personnes lont un choix
comme iI est indique au poinl (1), les formulaires de choix doivenl etre praduits au centre liscal du
cesslonnaire au 1Is seront traites en bloc);
(4) separement de toute declaration de revenus (vous pouvez fe produire avec une declaration dans
une meme enveloppe. mais ne pas I'inserer dans la dl!iclaration et ni l'aUacher a celle-ci).
r------.==...==""'~-RESERVE AU MINISTERE
• Les articles et paragraphes mentionnl!is dans ce formulaire renvoient a la Loi de i'imp6/ sur fe revenu,
tf' d'assurance sociale ou
W de compte de soci~tMNO d'entreprise
Nom du conlribuable (cMan!) (en tettres mouliles)
Code postal
Adresse
I
Bureau des services IiscauK
AnnEle d'imposition du contribuable
Pour la p~riode du
19
Nom du copropriiltaire, s'il y a lieu (s'il y en a plus d'un, Jolgnez une tiste conlenanlles mlimes renseignements)
19
"
Numilro d'assurance sociale
Adresse
Code postal
Raison sociale de la sociilll!i (cessionnalre)
Num~ro
Adresse
Codeposiat
,
I
,
Bureau des services Ils,-
de compte! d'entroprise
-I
Bureau des services tiscaux
Annila d'imposition de la soci~til
Pour Ia. pMiode du
19
Nom de la personne ~ contacter pour des renselgnemenls suppl~mentaires
PENALITE POUR LES CHOIX TARDIFS ET MODIFIES
Les choix produits apres fa date d'echeance ou les choix modifies sont assujettis
production tardive conlormement au paragraphe 85(8),
Calcul de la penalite :
Justa valaur marchande du bien translera .
Moins : Somma convenue
Dl!Iarence , .... , ,
.
MontantA
100$XN.
.
...
..
, ,
, ,
Ind. r~gional
a une penalite pour
Num6ro de IAr~phone
RESERVE AU MINISTERE
$
$A
$Xl/4X10/0XN.
, , , ,
19
"
.,
,
. . . , . , .. ,
, . , , . ' . , , .
.
.
$ B
$C
N representant Ie nombre de mols ou parties de mols dans la ceriode aUant de la date d'acMance
Is date de production du choix at C ne pouvanl pas dl!Jpasser 000 $,
La penalite correspond au mains eleve des montanls B el C ci·dessus
a
I
$
a
Si une panalite est payable, 11 faut faire un cheque ou un mandai I'ordra du Receveur ganeral. II faut
fndlquer «T2057» sur Is piece de versement ainsi que I'annee d'imposllion,le nom et Ie numero
d'assurance sociale du contribuable (au Ie numero de compte/d'entreprisa dans Ie cas au Ie cedant est
une societe) dont Ie compte doit eire credite.
Las sommes impayees, y compris les penalites pour production tardive, sont assujetties a des inter~ts
com oses uolidiennement au laUK rascri!.
.
Somme ci-incluse
S
- 25 -
TIllS AGREEMENT made this ___ day of 'MONTH, A.D. 19'YEAR
BElWEEN:
VENDOR
(hereinafter referred to as the "Vendors")
AND
PURCHASER COMPANY.
a body corporate incorporated pursuant
to the laws of the Province of Saskatchewan
(hereinafter referred to as the IIPurchaser")
WHEREAS VENDOR. is the owner of [describe what is being sold
Of
refer to
an attached schedule] (hereinafter referred to as the "transferred property").
AND WHEREAS the Vendor has agreed to sell. assign and transfer and the
Purchaser has agreed to purchase-all the Vendor's right, title and interest in and to the transferred
property, upon and subject to the terms of this Agreement.
NOW TIlEREFORE this Agreement witnesseth that in consideration of the
premises, and the mutual covenants hereinafter contained, the parties hereto covenant and agree
with each other as follows:
1.
The Vendor agrees to sell, assign and transfer unto the Purchaser and the Purchaser agrees
to purchase from the Vendor all the Vendor's right, title and interest in and to the
transferred property at and for the' price equal to the fair market value thereof (hereinafter
referred to as the Purchase Price) and the best estimate of such fair market value is
$[purchase price].
,j
- 26 -
)
2.
The Purchase Price shall be paid by the Purchaser to the Vendor as follows:
a)
by payment to the Vendor of $ ....
b)
by allotment and issuance to the Vendor of [describe' the shares ego class A]
shares of the capital stock of the Purchaser.
c)
by the issuance to the Vendor of a promissory note in the amount of $* payable
on demand.
3.
The Parties hereto intend that the Purchase Price for the transferred property shall be the
fair market value thereof. If the Minister of National Revenue for Canada or any other
competent authority at any time proposes to issue, or does issue, any assessment or
assessments, that impose or would impose any liability for tax of any nature or kind
whatsoever, on any of the parties hereto, or any other person on the basis that the fair
market value of the transferred property is different than the Purchase Price, and in the
event that the parties hereto agree, or a competent court or tribunal finally adjudges that
the fair market value of the transferred property is different than the Purchase Price (in
this paragraph referred to as the Adjusted Amount), then upon such agreement or
adjudication the consideration that the Vendor is entitled to receive for the transferred
property hereunder shall be varied by increasing or decreasing either the monies payable
to the Vendor or the number of shares issued herein as the parties hereto may agree.
4.
The Vendor and Purchaser shall jointly complete and file the form of Election (hereinafter
referred to as the Election) required under Section 85(1) of the Income Tax Act in respect
of the transferred property with the Minister of Natronal Revenue for Canada on or before
the earlier of the days when either the Vendor or the Purchaser are required to file a
return of income under the Income Tax Act for the taxation year in which this Agreement
is made.
)
- 27 5.
The amount of the Election shall be equal to the Vendor's reg. adjusted cost base ifnondepreciable property (land, shares, etc.) or undepreciated capital cost for depreciable
property (buildings, equipment etc)], If the Minister of National Revenue for Canada or
any other competent authority at any time proposes to issue or does issue any assessment
or assessments, that imposes or would impose any liability for tax of any nature or kind
whatsoever, on any of the parties hereto, or on any other person on the basis that the reg.
adjusted cost base if non-depreciable property (land, shares, etc.) or undepreciated capital
cost for depreciable property (buildings, equipment etc)] of the transferred property is
different than the amount stipulated above (in this-paragraph referred to as the elected
base) and in the event that the parties hereto agree, or a competent court or tribunal
-finally adjudges that the [ego adjusted cost base ifnon~depreciable property (land, shares,
etc.) or undepreciated capital cost for depreciable property (buildings, equipment etc)] of
the transferred property is different than the elected base (in this paragraph referred to as
the adjusted elected base), then upon such agreement or adjudication the Vendor and the
)
Purchaser shall file an amended Election under Section 85 of the Income Tax Act so that
the amount elected in respect of the transferred property is equal to the adjusted elected
base and the consideration that the Vendor is entitled to receive in relation to the
transferred property shall be varied by increasing or decreasing either the monies payable
to the Vendor or the number of [what class of shares] shares issued herein, as the parties
hereto may agree.
6.
The Vendor covenants that he is the owner of the transferred property and he is entitled
to sell, assign and transfer said property and to deliver clear title for same to the
Purchaser.
7.
The Vendor shall and will from time to time and at all times hereafter upon reasonable
request of the Purchaser, and at the expense of the Purchaser, make do and execute or
cause or procure to be made, done and executed all such further acts, deeds, Agreements,
transfers, instruments and writings for the purpose of completing this agreement.
/
• 28 •
8.
The invalidity in whole Of in part of any covenant, promise or undertaking, or any section,
sub-section, sentence, clause, phrase or word, or any other provision of this Agreement
shall not affect the validity of the remaining portion thereof.
9.
Whenever the singular or masculine are used herein, the same shall be construed as the
plural and the feminine or neuter where the context
10.
Of
the parties hereto so require.
This Agreement may be altered or amended in any of its provisions when any such
changes are reduced to writing and signed by all the parties hereto but not otherwise.
11.
This Agreement shall be construed and governed by the laws of the Province of
Saskatchewan.
12.
This Agreement shan enure to and be binding upon the parties hereto, their respective
heirs, successors, administrators and assigns.
13.
[Add any GST clauses which may be necessary].
IN WITNESS WHEREOF the Vendor has hereunto set his hand and seal this
day
of "'month, A.D. 19*year.
SIGNED, SEALED AND DELIVERED
in the presence of:
Witness
VENDOR
)
- 29 -
IN WITNESS WHEREOF (PURCHASER CORPORATION( has hereunto affixed its
corporate seal as attested to by its proper signing officers in that behalf on the _ _ _ day of
"'month, A.D. 19*year.
(PURCHASER CORPORATION)
PER:
(corporate seal)
PER:
)
)
- 30 -
/)
MINUTES OF A MEETING OF TIlE DffiEcroRS
OF (PURGIASER CORPORATION(,
HELD AT REGINA, SASKATCHEWAN ON TIlE
DAY OF 'MONTII, A.D. 19'YEAR
AT
O'CWCK IN TIlE
NOON
PRESENT:
•
•
•
'" acted as Chairman and '" acted as Secretary.
The Chairman then advised the meeting that (VENDOR( proposed to sell to the
Corporation [describe what is being sold]. He advised that the sale to the Corporation was
intended to be carried out as a IIralloverl! pursuant to Section 85 of the Income Tax Act. A copy
of the proposed agreement was submitted to the Directors and reviewed by them.
Upon a motion duly made, seconded and carried unanimously:
BE IT RESOLVED:
1.
The President is hereby authorized to executed the said agreement on behalf of the
corporation and to affix the corporation's seal thereto.
2.
The President is further authorized to execute all other agreements and documents,
necessary to give effect to the said agreement.
3.
The President is further authorized on behalf of the corporation to sign the joint election
required to be filed with Revenue Canada, Taxation.
- 31 -
Page 2
4.
The corporation hereby authorizes its solicitors, Pedersen, Norman, McLeod & Todd to
prepare the necessary share certificates in the amounts stipulated in said agreement and
said shares shall be issued to the Vendor as fully paid non-assessable shares of the capital
stock of the corporation.
5.
The President is authorized to execute the said share certificates, affix the corporation's
seal thereto and register same in the books of the corporation.
6.
The stated capital account of the corporation for its [describe class of shares] shares shall
be increased by the amount of $* per share.
WAIVER OF NOTICE
The following memorandum was then read and ordered to be inserted in the minutes:
liThe undersigned being all of the Directors of the corporation
present for this meeting hereby consent to this meeting being
held at the above time and place and hereby waive notice of the
meeting and consent to the transaction of such business as may
have come before as testified by their signatures thereto .
•
•
)
- 32 Page 3
There being no further business the meeting then adjourned.
CHAIRMAN
)