T2057 - Election on disposition of property by a taxpayer to a taxable canadian corporation

The rollover provisions of the Act, under subsection 85, permit a taxpayer to elect to transfer "eligible property" to a taxable Canadian corporation in exchange for consideration that includes at least one share of the corporation. "Eligible property" includes most capital property, Canadian or foreign resource property, eligible capital property and inventory, other than inventory that is real property. Where the taxpayer and the corporation agree upon an amount that does not exceed the fair market value of the property disposed of and is not less than the fair market value of any non-share consideration that is received, the amount agreed upon becomes, subject to certain specific limitations, the taxpayer's proceeds of disposition and the corporation's cost of the property. By choosing an appropriate amount within those limits the property can be transferred on a tax-deferred basis, that is, the corporation assumes the taxpayer's potential income tax liabilities for the property.

Filing requirements

Form T2057 applies to elections made under subsection 85(1). Transferors must file this form separately from any income tax return at the tax centre where they file their tax returns. The transferor, or a person authorized in writing on the transferor's behalf, and the authorized officer of the transferee have to sign the election form.

Two or more transferors may elect to transfer the same property, or a number of partners may transfer their partnership interests. In these situations, one designated person should file all the completed T2057 forms and a list of all the electing transferors simultaneously at the tax centre serving the transferee corporation. We will accept the signature of the person that the transferors authorized to act on their behalf if that person has provided proof of authority. The designated person has to provide the address and social insurance number, or the corporation account or business number for each transferor resident in Canada.

The deadline to file forms T2057 is the earliest date on which any of the parties to the election has to file an income tax return for the taxation year in which the transfer occurred.

The parties to an election have to provide all the information required by the forms, obtain the appropriate signatures, and pay any late-filing penalties when filing the forms.

Useful links:

RC4070, Guide for Canadian Small Businesses
Guide RC4022, General Information for GST/HST Registrants
Transfer of Property to a Corporation Under Section 85
Transfer of Property to a Corporation under Subsection 85(1)
Winding-up of a Partnership