Case Study — Dr. X (Ontario Family Physician): MPC + Section 85 Rollover of Practice Assets Saves $47K First-Year Deferred Tax

Engagement summary: Ontario family physician, mid-career, with $520,000 net annual billing under a sole-proprietor GST/HST-exempt medical practice. Insight structured an MPC, filed CPSO Certificate of Authorization, rolled practice assets under Section 85, and built a compensation mix preserving RRSP contribution room.

Client archetype

Dr. X is a 42-year-old family physician in the GTA operating as a sole proprietor for 11 years. 2025 net billing to OHIP: $520,000. Personal marginal rate: 53.53% Ontario top. Practice assets on hand: clinic equipment (UCC $18,000, FMV $28,000), custom EMR software licenses (FMV $6,000, cost $2,000), goodwill and patient files (FMV $80,000 as valued for MPC transfer, nominal cost). Sole proprietor did not carry any HST registration (medical services exempt under ETA Schedule V, Part II).

The challenge

Dr. X was paying $220,000 in personal tax annually and lacked a structural vehicle for tax-deferred earnings retention, family compensation, or eventual practice-sale LCGE eligibility. Direct incorporation without Section 85 planning would have triggered a disposition-at-FMV of the clinic equipment and goodwill, producing about $50,000 of immediate personal capital-gain and recapture income to Dr. X at 53.53%. The clinic lease was also month-to-month and needed to be reassigned to the corporation without triggering an HST self-supply.

Insight Accounting CPA approach

Insight’s engagement plan ran three parallel workstreams:

1. MPC incorporation. Numbered corporation incorporated under OBCA with the required voting/non-voting share structure under s. 3.2(4). Voting common: Dr. X. Non-voting family shares: Dr. X’s spouse (age 58; TOSI-restricted for now, will unlock at age 65 spousal-retirement exception). CPSO Certificate of Authorization submitted with the standard MPC package; issued in 5 weeks.
2. Section 85 rollover. Insight prepared Form T2057 rolling clinic equipment at UCC ($18,000), EMR licenses at cost ($2,000), and goodwill/patient files at cost (nominal). Consideration to Dr. X: 1 common share plus a $20,000 shareholder-loan note representing boot equal to the sum of elected amounts. Result: zero personal capital gain on incorporation; MPC took over practice assets at rolled-forward tax basis. Filed within the T1 due date for the year of transfer.
3. Compensation mix. Salary of $180,500 gross to Dr. X in year 1 (maximizes 2026 RRSP room of $32,490 based on 2025 earnings + full CPP; net take-home about $120,000). Dividend of $30,000 non-eligible to Dr. X from post-tax MPC retained earnings. Balance ($260,000) retained in the MPC at the SBD-rate corporate tax of 12.2%.

   Measurable outcome

   Year-1 result: personal-plus-corporate tax paid $173,000 vs. $220,000 as a sole prop. Deferred tax saving: $47,000. RRSP contribution room preserved: $32,490 (worth roughly $17,000 in deferred tax at Dr. X’s marginal rate). Section 85 rollover cost: zero (rolled at UCC/cost). MPC structural readiness for future LCGE claim on eventual sale (currently indexed to $1,275,000 for 2026): established from day one via voting/non-voting share structure. Total value delivered in first fiscal year: about $64,000 of tax deferred plus a durable structural platform.

   Key facts

   • Section 85 elected amounts: equipment $18,000; EMR $2,000; goodwill nominal.
   • Share structure: voting common to physician, non-voting to spouse (per OBCA s. 3.2(4)).
   • CPSO Certificate: issued 5 weeks after complete application.
   • Combined 2026 Ontario SBD rate: 12.2%.
   • Combined Ontario top personal rate: 53.53%.

   — Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA

   Confidentiality: All identifying details anonymized; specifics protected under CPA Ontario Rule of Professional Conduct 208 (Confidentiality). Archetype descriptions are composites illustrative of engagement patterns.

   Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.

   About the Author

   Bader A. Chowdry, CPA, CA, LPA is the owner of Insight Accounting CPA Professional Corporation in Mississauga, Ontario. Insight serves owner-managed businesses with $500K–$50M in revenue across professional corporations, medical and dental practices, construction contractors, real estate investors, technology startups, and NPO/charity boards. Bader holds the Licensed Public Accountant designation from CPA Ontario and combines Big Four training with owner-manager specialization. Book a consultation via the intake form.