I want to incorporate in Canada, and a law student told me I should do a "section 85 roll over" to transfer the cash I want to use to operate my corporation. its not a lot of cash, just 40-50k, but this roll-over will cost me 3k to do.

it just seems strange. Why is this necessary? Does every business owner incorporating need to transfer cash this way?


A Section 85 rollover is used when you want to transfer appreciated assets of a sole proprietorship to a corporation, in order to defer taxation of untaxed capital gains.

A Section 85 rollover is not necessary in the case of a contribution of cash to a corporation, because cash is normally neither appreciated nor depreciated (unless it is a foreign currency), although it might be appropriate if you instead had an appreciated money market fund that you were contributing (people are sloppy about what they mean when they say "cash").

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