Section 85: Can I transfer into a corporation a part of a building?

Eg) I have a building - 30% of it is used for my business (as an office space) and 70% of it is rented out. I wish to transfer the office space into my building on a tax-deferred basis using s. 85 but I want to keep the rental component out because that will ruin my SBC status. Can I do elect to s. 85 rollover on only part of the building that relates to my office space?

[Note: this applies only to Canadian taxation]

Sources are appreciated, thanks!

George2014-02-08T09:29:59Z

Favorite Answer

I was wrong first time. Real property is generally eligible. Real property held as inventory is not. I mis-read a reference.
The source is section 85(1.1) of the Act. Your property is eligible under paragraph a. It isn't clear if you have to elect for the whole property or if you can elect only for a portion of the property.

Looking at the form and 85(1.1) it doesn't say the interest has to be an undivided interest in real property, so I would expect that you can transfer only a part of the real property so long as it is possible to clearly differentiate one from the other. But I'm just some guy.

Better to talk to someone who knows, or go to CRA for a technical interpretation. If you mess up the election/rollover it can cost.

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