The preparation of a successful Section 85 Election requires expert timing, execution and coordination of key sequential steps between:
- You (the investor)
- Your trusted investment professional/financial institution
- The acquiring company
- Your tax accountant
- The Canada Revenue Agency (CRA)
The Process Involves:
Step 1 – Selecting the optimal option in the offer (shares / cash combination and requesting Section 85 Election eligibility) with your trusted investment professional/financial institution based on your personal circumstances
Step 2 – Correct preparation of the required Section 85 Election form
Step 3 – Coordinated delivery and acquisition of approvals of the Section 85 Election with both the acquiring company and the CRA on a timely basis.
All of these steps are time sensitive. Failure at any step to accurately prepare and process the required documentation could jeopardize your ability to benefit from the current year tax savings and tax deferral available from the proper execution of a Section 85 Election.
See what happens When Things Go Wrong, and deadlines for completing a Section 85 Election are missed.
Eligible Joint Tax Elections
The following table provides examples of the tight timeline for execution required for Section 85 Elections for a number of high profile takeovers in the Canadian market. Deadlines set by acquiring companies typically follow not long after the close of the acquisition and have to be respected in order to be able to take advantage of the available joint tax election.
|Take-over Company||Acquiring Company||Transaction Date||Acquiring Company Timeframe for Joint Approval||Acquiring Company Deadline for Joint Approval||Deadline for Submitting Election to CRA*|
|Manitoba Telecom Services Inc. (MTS)||BCE||March 17, 2017||90 Days||June 15, 2017 (Now Closed)||April 30, 2018|
|Spectra Energy Corp.||Enbridge Inc.||February 27, 2017||60 Days||April 28, 2017 (Now Closed)||April 30, 2018|
|Shoppers Drug Mart Corporation||Loblaw Companies Limited||March 28, 2014||Upon Request||December 31, 2014 (Now Closed)||April 30, 2015|
|Bell Aliant||BCE Inc.||September 19, 2014||90 Days||December 18, 2014 (Now Closed)||April 30, 2015|
|Inter Pipeline Fund LP Units||Inter Pipeline Fund Common Shares||September 1, 2013||136 Days||January 15, 2014 (Now Closed)||April 30, 2014|
* Deadline for most personal income tax returns. Self employed individuals, trusts and corporations may have different tax return deadlines that have to be followed.
Get it Right the First Time
Companies that acquire your target company shares will find it easier to work with and jointly approve Section 85 Elections that are prepared by knowledgeable experts with experience and a proven track record for correctly preparing the required documentation. The CRA will also be able to more efficiently process and approve accurately prepared and submitted Section 85 Elections.
It May Not Be Too Late – Late Election Opportunities
For some transactions it may still be possible to make a Section 85 Election to reduce the amount of taxes payable related to the year of the take-over transaction. The availability of a late election depends on both the acquiring company’s willingness to jointly sign a late election, and certain time limits administered by the CRA. Contact us for more information if you believe you may qualify for an opportunity to file a late Section 85 Election at firstname.lastname@example.org.