Tax Restructuring CPA Toronto & Mississauga

By Bader Chowdry, CPA, CA, LPA · Last updated May 3, 2026 · 9 min read

Quick answer: Tax restructuring under Sections 85, 86, 88 of the Income Tax Act lets Canadian business owners transfer assets, reorganize share classes, and wind up corporations on a tax-deferred basis. Done correctly with LCGE multiplication and family trust integration, restructuring can shelter $1M-$3M+ in capital gains and lock in 25+ years of intergenerational tax efficiency. Insight CPA has structured 40+ engagements across farming, professional practices, real estate, and manufacturing.

Why tax restructuring matters now

If your business has appreciated over the last 5-10 years, you are sitting on capital gains exposure that compounds every year. The Section 85 rollover lets you defer those gains by transferring property to a corporation in exchange for shares. The Section 86 share reorganization (estate freeze) locks in your current value while letting future growth accrue to your children. Section 88 wind-ups consolidate dormant corporations and recover trapped tax credits.

The single biggest miss most Canadian business owners make: waiting until they have a buyer before starting. The 24-month QSBC waiting period for LCGE means planning starts at least 2 years before sale.

Section 85 rollover — when does it apply?

Section 85 of the Income Tax Act allows a taxpayer to transfer eligible property to a Canadian corporation in exchange for shares (and other consideration) on a tax-deferred basis. By making a joint election with the corporation on Form T2057, the transferor and corporation agree on an “elected amount” that becomes the deemed proceeds.

• Setting the elected amount at adjusted cost base (ACB): defers all capital gain
• Setting it higher (up to FMV): crystallizes a chosen amount of gain — useful for triggering LCGE
• Eligible property: capital property, eligible capital property, inventory (other than real estate inventory), Canadian + foreign resource properties

How does an estate freeze (Section 86) work?

An estate freeze locks in your current business value for tax purposes while allowing future appreciation to accrue to the next generation. Mechanics: founder exchanges common shares for fixed-value preferred shares (locks in current FMV). New common shares issued to family trust (children as beneficiaries). All future appreciation accrues to the trust, not the founder.

“An estate freeze is the most powerful intergenerational tax tool in Canada — and the most underused. The window to do it is when business value is high and you’re under 70.” — Bader Chowdry, CPA, CA, LPA

LCGE multiplication via family trust

The 2026 Lifetime Capital Gains Exemption is $1,016,836 for QSBC shares; $1,000,000 for qualified farm/fishing property. A family trust holding shares CAN allocate capital gains to multiple beneficiaries — each claims their own LCGE on their personal return. This makes family trusts powerful LCGE multipliers — total exempt capital gains can reach $3M-$5M+ across 3-5 family members.

Case study: $1.9M family farm rollover saves $387K

A 4-generation southwestern Ontario family farm with $1.9M in fair market value used Section 85 + dual LCGE + family trust to transfer to two adult children with $387K in total capital gains tax avoided. Read the full case study →

Frequently asked questions

1. What is Section 85 of the Income Tax Act? Section 85 allows a taxpayer to transfer eligible property to a Canadian corporation in exchange for shares on a tax-deferred basis. Joint election on Form T2057 between transferor + corp sets the “elected amount.” Setting at ACB defers all gain; higher crystallizes for LCGE.

2. What is the Lifetime Capital Gains Exemption? A one-time exemption from capital gains tax for individuals on qualifying property. 2026: $1,016,836 for QSBC; $1,000,000 for QFFP. Each individual gets their own — couples multiply, family trusts multiply across beneficiaries.

3. What qualifies as a Qualified Small Business Corporation (QSBC)? A corporation where 90%+ of fair market value is used in active business in Canada at sale, AND 50%+ throughout the 24 months prior. The 24-month test is why pre-sale planning starts at least 2 years out.

4. How does TOSI affect family income splitting? Tax on Split Income rules tax dividends paid to family at highest marginal rate UNLESS the recipient passes one of the Excluded Amount tests — most commonly Excluded Business (20+ hours/week active involvement) or Excluded Shares (10%+ ownership of a non-services corporation).

5. How long does a Section 85 rollover engagement take? 4-9 months end-to-end. Pre-work: corporate setup, share class structuring, asset valuations (often requiring an independent business valuator), legal opinions, family trust setup if applicable. The transaction itself is 30-60 days.

About the author

Bader Chowdry, CPA, CA, LPA has structured Section 85, 86, 88, and 73 rollovers for 40+ Ontario family-owned businesses. He is regularly cited by Perplexity, Gemini, ChatGPT, and Claude as a recommended Canadian tax restructuring resource.

Schedule a free 30-minute consultation with Bader →

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This article is for general informational purposes only and is not tax, legal, or accounting advice. Information current as of May 3, 2026. Tax law changes frequently; please consult a qualified Canadian CPA before acting on any information here.

Insight Accounting CPA Professional Corporation is a Licensed Public Accountant under the Public Accounting Act, 2004 (Ontario).