Section 85 roll over of public shares and increasing capital gains tax in Budget

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scorpionman
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Section 85 roll over of public shares and increasing capital gains tax in Budget

Post by scorpionman »

There's some talk of increasing marginal capital gains tax to 36 percent , the highest in the world. Some articles suggest section 85 rollover into a ccpc. Just wondering does anyone know if public shares can be rolled over with gains like this or the property must be active business property like buildings , patents, etc ...?
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Peculiar_Investor
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Re: Section 85 roll over of public shares and increasing capital gains tax in Budget

Post by Peculiar_Investor »

The good news, Budget 2017 did not include any increase in capital gains inclusion rate (see this discussion for more on Budget 2017 in general).

Now to attempt to answer your question. I found this article, How to use a section 85 rollover | Advisor.ca, that states
James and Deborah Kraft wrote:What is eligible property?

In broad terms, eligible property includes:
  • capital property* (depreciable and non-depreciable);
  • eligible capital property;
  • resource property; and
  • inventory (excluding real or immovable property).
*Generally excludes real or immovable property owned by non-resident.[/list]
Many moons ago, my spouse had IPO shares from employer which represented a significant portion of our net worth. We weren't comfortable that employment (human capital) and net worth were tied so closely together, so investigated some income splitting/tax planning strategies. IIRC our tax accountant suggested setting up HoldCo which would be used for income splitting (and other purposes). Then we could do a Section 85 transfer of the now public company shares to the HoldCo, For a variety of unrelated reasons, we never executed this planning manoeuvre.

So this non accountant, non tax-lawyer, can cite one long ago anecdote to suggest that yes public shares can be rolled over using Section 85.

Perhaps DavidR or another real accountant/tax lawyer can weigh in.
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DavidR
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Re: Section 85 roll over of public shares and increasing capital gains tax in Budget

Post by DavidR »

PI, your anecdote is still good. I can confirm that public company shares may be rolled over.
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