• TP-518-V Transfer of Property by a Taxpayer to a Taxable Canadian Corporation

You may elect to be exempted from the rule under which the sale price of a property is equal to its FMV on the date of transfer if you transfer property to a taxable Canadian corporation for a consideration that includes a share of the capital stock of the corporation. To be exempted, you and the transferee (the corporation or partnership in question) must first make an election with the CRA in order to agree on an amount to be deemed the sale price of the property. Then complete form TP-518-V, Transfer of Property by a Taxpayer to a Taxable Canadian Corporation. As a rule, you must enter the amount agreed on and indicated in the election form you submitted to the CRA (form T2057). You may, however, agree on a different amount if the conditions mentioned in form TP-518-V are met.

By completing and filing form TP-518-V, you may also make an application to the Minister to amend a previously filed form, in order to agree on an amount (if this has not already been done), to be deemed to have never agreed on an amount, or to agree on a new amount. You must file form TP-518-V separately from any tax return, before the later of the following dates:

• the filing deadline for your tax return or for the corporation's tax return for the taxation year in which the transfer occurred, whichever is earlier; and

• the last day of the two-month period following the end of your taxation year or the corporation's taxation year, whichever ends later.

You must enclose with this form a copy of every document filed with the CRA in accordance with subsection 85(1) .

Information

Table 1 lists the documents to enclose with this form, as well as the filing deadline, by application type. It also indicates whether the conditions in Table 2 below must be met and if the parties must complete Part 2 above.

Table 1 – General information

Table 2 – Conditions for certain applications

Notes

1. This account number is shown on the federal Trust Income Tax and Information Return (form T3RET).
2. Enter the following in column C:
   • for capital property other than depreciable property, the adjusted cost base (it is subject to adjustments under sections 255 and 257 of the Taxation Act);
   • for depreciable property, the lesser of the following:
     • the capital cost of the property, or
     • the UCC of all the property in that class immediately before the transfer;
   • for inventory, securities and debt obligations, the cost amount.

   If the transferred property is class 14.1 property acquired before January 1, 2017, contact us.

3. The agreed amount must generally be the same as the amount in form T2057. However, if the parties file a rollover application for Québec income tax purposes, an application to the Minister or another application for which you are completing Part 2, you can enter a different amount, calculated while taking into account the limits in columns B, C and D. The agreed amount must therefore be:
4. • equal to or greater than:
     • the lesser of the amounts in columns B and C, except for mining property, and
     • the amount in column D; and
   • less than or equal to the amount in column B.

   If the transferred property is depreciable property and, on the 30th day following the transfer, the transferor or a related person is its owner or has the right to acquire it (except for a right that exists only as a guarantee and arises from a hypothec, a sale contract or similar title), the agreed amount under the rules above must be equal to or less than the lesser of the following:

   • the capital cost of the property; or
   • the UCC of the applicable class multiplied by the ratio between the FMV of the property and the FMV of all the property in that class.

5. The transfer of the property by the transferor to the transferee constitutes a disposition of property, and the agreed amount (column E) represents both the proceeds of disposition for the transferor and the capital cost of the property for the transferee. Depending on the type of property, the transferor must report all amounts entered in column F as a capital gain or as income. For depreciable property, part of the amount can be reported as a capital gain and part as business or property income.

   If you entered 0 in column F because the amount is negative, the amount may constitute a capital loss or, for depreciable property, a terminal loss.

   For more on the tax treatment of the disposition of property, see guide IN-120-V, Capital Gains and Losses.

6. The property can be capital property that is an immovable held by a non-resident or a NISA fund No. 2.
7. Enter the number of months or fraction of a month from the filing deadline (see page 5) to the day the required documents were sent or, for an application to the Minister, the number of months or fraction of a month from the filing deadline for the TP-518-V form that the parties are amending to the date of the application to the Minister.
8. Attach a copy of the document authorizing the person to sign.
9. The income tax returns in question are:
   • if there is one transferor, the transferor's income tax return for the taxation year covered by lines 04 and 05 in section 1.1;
   • if there are multiple transferors, their income tax returns for the taxation year covered by lines 04 and 05 in section 1.1;
   • the transferee's income tax return for the taxation year covered by lines 13 and 14 in section 1.2.
10. If one of the electing members is a partnership, you must also enclose the information requested in section 1.1 for every member of the partnership.

Useful links:

IN-120-V - Capital Gains and Losses