What the election does
Moving property into a corporation is normally a sale, even when you own the corporation. If the property has grown in value, you could face a gain on a transfer that produced no cash. Section 85 lets you and the corporation choose an agreed amount, within limits set by the Act, so that all or part of the income is deferred.
The deferral is not forgiveness. The election postpones income that would otherwise arise on the transfer, so the deferred amount is generally still part of your tax picture when you later sell the shares or the corporation sells the property.
The conditions that matter
The corporation must be a taxable Canadian corporation, and what you receive must include at least one share. The CRA states that without a share the election is not valid. You elect a dollar amount for each property rather than describing it, and the Act automatically adjusts the agreed amount in some situations, so the number you choose is not always the number that applies.
The election is made jointly on Form T2057, signed by you and an authorized officer of the corporation. It generally has to be filed by the earliest date that any party must file an income tax return for the year of the transfer. A late election can be accepted within three years of that date, with a penalty, and later requests are considered case by case.
An illustrative example
These figures are illustrative only. Suppose you carry on a business on your own and move its assets into a new corporation. The assets are worth $100,000 and cost you $40,000 for tax purposes. You receive shares and elect an agreed amount of $40,000. Choosing an agreed amount equal to your tax cost means you report no gain on the transfer, and the $60,000 difference is deferred rather than taxed now.
Depreciable property adds another layer. The CRA notes that a transfer to a corporation is one of the situations where recapture can be postponed, which is why the agreed amount for each class needs to be set deliberately.
What to discuss with your accountant
Raise the election before the transfer date, not after. Bring a list of the property, its cost and tax value, an estimate of fair market value and your plans for taking back shares or other consideration. The CRA expects you to keep the working papers behind each value.
Ask about related issues, such as benefits conferred on related persons, the paid-up capital of the shares and whether late-filing penalties could apply. An election that was drafted incorrectly can be hard to amend, because the CRA does not permit revisions made mainly for retroactive tax planning.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- IC76-19R3: Transfer of property to a corporation under section 85Canada Revenue Agency
- T2057: Election on disposition of property by a taxpayer to a taxable Canadian corporationCanada Revenue Agency
- T4002: Capital cost allowance (CCA) chapterCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.