Eligible property (s. 85(1.1))

A seller who moves assets into a company on a section 85 election can elect only for property on this list. Subsection 85(1) applies where a taxpayer disposes of eligible property to a taxable Canadian corporation for consideration that includes shares of the corporation, and the two have jointly elected in prescribed form and in accordance with subsection 85(6).

What the list covers

Subsection 85(1.1) lists, among other things, capital property, Canadian resource property, foreign resource property and inventory. The capital property paragraph excludes real or immovable property, and options and interests in it, owned by a non-resident person, though other paragraphs bring some of it back, such as property used in a business carried on in Canada, subject to subsection 85(1.2). The inventory paragraph excludes real or immovable property, and options and interests in it, whoever owns it. Later subsections add further exceptions, and other paragraphs cover insurers and lenders, so read the subsection itself for your asset. The election form is covered at Form T2057.

What to check

• Whether each asset on the election is on the list
• Whether any real property is owned by a non-resident
• What the CRA says about a mistaken listing: its section 85 circular says the Department will adjust an election form to disregard references to an ineligible property without affecting the validity of the other transfers, and warns of possible tax consequences in transferring ineligible properties

For how an election fits an asset sale, see section 85 rollover and asset sales.