What are Tax Rollovers?

Tax Rollovers are an election of a certain type of action that results in different tax treatment than what might otherwise occur if there was no election of a tax rollover.

As the term implies, a rollover allows a person to “roll” certain tax liabilities “over” to another legal entity if certain circumstances exist.

The most common forms of rollovers are found in the Canada Income Tax Act (ITA) and are described in sections 85, 86, 87 and 88. Accordingly, these rollovers are typically referred to as Section 85 Rollovers, Section 86 Rollovers, Section 87 Rollovers and Section 88 Rollovers.

The choice of tax rollover will depend largely on the facts and circumstances surrounding the desire of the persons holding the tax liability and the options available to defer or transfer the tax liability as described in the various rollover provisions of the ITA.

Modern entity management software is designed to simplify the process to reflect, document and file various tax rollovers.