Section 85 calculator

Incorporating is a sale. Section 85 lets you pick the price.

When you move your business into a new corporation (call it You, Inc.), the tax rules treat it as a sale at full value, even though no money changes hands. Section 85 lets you pick a lower price. You, Inc. then can owe you that price as an IOU, less any debt it takes over. It can pay back the IOU later with no more tax. The higher the price, the more tax you pay now.

Ontario · 2026 tax year · one owner moving a sole proprietorship

Your income this year Salary and other income

Customers, name and reputation Goodwill value, excluding equipment

Trucks, tools and computers you've been writing off

The price you pick Elected amount

Tax you pay now $18,822 Due April 30, 2027

You, Inc. owes you $100,000 Take it out tax-free, any time

Left in your shares $200,000 Still yours

Tax saved $16,032 vs. the same money as dividends later

You, Inc. writes off $50,000 over time · saves about $5,600

Uses 2026 federal and Ontario rates for one owner. Minimum tax and the Ontario Health Premium aren't included. Your accountant checks the asset values, files form T2057, and confirms whether the transfer qualifies for the GST/HST election on form GST44.

Planning to sell the company one day? A lower price keeps today's value in your shares. A future sale may qualify for the lifetime capital gains exemption if the shares meet its conditions.

Walk through your situation in ChatGPT

Copy a prompt with your numbers and official sources. It asks ChatGPT to compare the options and work through the details with you.

Your prompt

Help me understand moving my Ontario sole proprietorship into a corporation using Section 85 in 2026. Walk me through it in plain English, one question at a time.

My starting figures from the calculator (CAD):
- Other annual income: $90,000
- Goodwill (customers, name and reputation): worth $300,000; purchase cost $0; remaining tax value $0; debt assumed by the company $0. Confirm these values with me.
- Equipment: none entered; ask whether anything is missing
- Total elected amount I am exploring: $100,000
- IOU after assumed debts: $100,000
- Calculator inputs valid: yes

Start by confirming the transfer date, ownership, asset values and tax costs, debts the corporation will take over, cash or IOU I want, and cash available to pay tax. Ask whether I expect to sell the company later. Do not assume my valuation is established.

Compare electing at tax cost, my selected amount, and fair market value. Show a table of each asset's elected amount, capital gain or recapture, extra personal tax, IOU, value left in shares, and the corporation's tax cost and future write-offs. Explain the trade-off between tax now and money the company can repay later. Keep future corporate tax savings separate from personal tax savings, and state the income and year assumed for any dividend comparison.

Verify the permitted election range for each asset, share consideration, and the effect of assumed debts and other non-share consideration. Check goodwill and equipment rules separately, including pooled depreciation, passenger vehicles and first-year write-offs. Do not treat the elected amount as automatically equal to an IOU. Flag minimum tax, Ontario surtax and Health Premium, credits and rate changes when they affect the result. Explain conditions for a future capital gains exemption without assuming my shares qualify. Check T2057 deadlines and whether a GST/HST election is available rather than assuming it applies.

Read and cite these official sources before calculating. Section 85 is federal; Ontario sources cover provincial taxes. Check the rules effective on my transfer date, distinguish enacted rules from proposals, and say if a source cannot be opened or is outdated:
Ontario: personal income tax: https://www.ontario.ca/document/filing-your-personal-income-tax-return
Ontario: corporate income tax: https://www.ontario.ca/document/corporations-tax/corporate-income-tax
CRA: Section 85 transfers: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic76-19/transfer-property-a-corporation-under-section-85.html
CRA: Form T2057: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2057.html
CRA: 2026 income tax rates: https://www.canada.ca/en/revenue-agency/services/tax/individuals/tax-rates-brackets/current-year.html
Federal law: Section 85: https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-85.html

Show the arithmetic and assumptions. If a figure is missing, ask instead of inventing it. Finish with the information and decisions to take to my accountant.

Section 85 is federal. Ontario’s pages explain provincial taxes; the CRA and federal law cover the transfer rules.