A section 85 rollover lets a taxpayer transfer eligible property to a taxable Canadian corporation in exchange for shares (and possibly other consideration) at a jointly elected amount that can defer the disposition for income-tax purposes. The election is filed on Form T2057, or Form T2058 for transfers from a partnership.
The elected amount becomes the transferor's deemed proceeds and the corporation's deemed cost, and it must fall within statutory limits — generally not below the cost amount and not above fair market value. Consideration other than shares (boot) above the elected amount triggers immediate recognition. Common uses include incorporating a sole proprietorship, inserting a holding company, implementing an estate freeze, crystallizing the lifetime capital gains exemption, and purifying a corporation before a sale.