The preparation of a successful Section 86.1 Election requires expert timing, execution and coordination of key sequential steps between:
- You (the investor)
- Your tax accountant
- Your trusted investment professional/financial institution
- The Canada Revenue Agency (CRA)
See how Section 86.1 Elections work
See the impact a Section 86.1 Spin-off Tax Election can have for investors
The Process Involves:
Step 1 – Determination of the net benefit of preparing a Section 86.1 Election
Step 2 – Correct preparation of the required Section 86.1 Election form
Step 3 – Inclusion in your tax return of the Section 86.1 Election with form and required adjustments to your reported income.
Timing Counts
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 reductions available from the proper execution of a Section 86.1 Election.
Eligible Spin-offs
The following table provides a few examples of the tight timelines for execution of a Section 86.1 Election for the spin-off of Yum! China Holdings Inc. from Yum! Brands Inc. in 2016, and the spin-off of PayPal Holdings from eBay Inc., in 2015. Several spin-offs have occurred in 2016 and timely execution of Section 86.1 Spin-off elections will help to reduce your taxes.
For a full list of spin-off elections that have been approved to date, see the CRA website. We can help with all of these spin-off elections.
| Parent Company | Spin-off Company | Transaction Date | Notice of Section 86.1 Availability |
Deadline for Submitting Election to CRA* |
|---|---|---|---|---|
| Becton, Dickinson and Company | Embecta Corporation | April 1, 2022 | October 2022 | April 30, 2023 |
| AT&T Inc. | Magallanes, Inc. (converted to Discovery+) | April 8, 2022 | June 2022 | April 30, 2023 |
| Hewlett Packard Enterprise | Seattle SpinCo (converted to Micro Focus ADS) | September 1, 2017 | October 2017 | April 30, 2018 |
| Hewlett Packard Enterprise | Everett SpinCo (converted to DXC Technology) | April 3, 2017 | October 2017 | April 30, 2018 |
| Ashland Global Holdings, Inc. | Valvoline, Inc. | May 12, 2017 | October 2017 | April 30, 2018 |
| MetLife, Inc. | Brighthouse Financial, Inc. | August 7, 2017 | October 2017 | April 30, 2018 |
| Biogen Inc. | Bioverativ Inc. | February 1, 2017 | October 2017 | April 30, 2018 |
| Hilton Worldwide Holdings Inc. | Park Hotels & Resorts | January 4, 2017 | October 2017 | April 30, 2018 |
| Hilton Worldwide Holdings Inc. | Hilton Grand Vacations | January 4, 2017 | October 2017 | April 30, 2018 |
| Arconic Inc. (f/k/a/ Alcoa Inc.) | Alcoa Corporation | November 1, 2016 | March 2017 | April 30, 2017 |
| Yum! Brands, Inc. | Yum China Holdings, Inc. | October 31, 2016 | January 2017 | April 30, 2017 |
| Xerox Corporation | Conduent Incorporated | December 31, 2016 | January 2017 | April 30, 2017 |
| Hertz Global Holdings, Inc. | Hertz Rental Car Holding Company, Inc. | June 30, 2016 | January 2017 | April 30, 2017 |
| eBay Inc. | PayPal Holdings | July 17, 2015 | November 2015 | April 30, 2016 |
| Baxter International | Baxalta Incorporated | July 1, 2015 | December 2015 | April 30, 2016 |
| Hewlett-Packard | Hewlett Packard Enterprise | November 1, 2015 | April 5, 2016 | April 30, 2016 |
| DuPont | Chemours | July 1, 2015 | November 2015 | April 30, 2016 |
| Energizer Holdings | Edgewell Personal Care | July 1, 2015 | December 2015 | April 30, 2016 |
| Time Warner Inc. | Time Inc. | June 6, 2014 | September 2014 | April 30, 2015 |
| Dover Corporation | Knowles Corporation | February 28, 2014 | October 2014 | April 30, 2015 |
| Abbott Laboratories | AbbVie Inc. | January 1, 2013 | January 2013 | 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. Late elections are permitted but will incur late charges.
Fiat Chrysler-Ferrari Spin-off in 2016 was is Not Eligible
On January 3, 2016 Fiat Chrysler Automobiles NV (FCA) completed the spin-off of Ferrari NV by issuing 1 new Ferrari share for every 10 shares of FCA held. Approximately 30.6% of the value of FCA was allocated to the new Ferrari shares received. Even though this transaction was structured to be a tax free spin-off for both U.S. and Italian tax purposes, it has been confirmed with Fiat Chrysler Canada that this transaction will not qualify as a tax-free spin-off for Canadian tax purposes. For this reason, Fiat Chrysler Canada has not made application to the Canada Revenue Agency for this spin-off to be treated as an eligible spin-off. Canadian shareholders of FCA that received shares of Ferrari will have to report the receipt of their Ferrari shares as a taxable foreign dividend in 2016.
Get it Right the First Time
Tax accountants and the CRA will appreciate Section 86.1 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 86.1 Elections.
Contact Us to Save Tax Now
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It May Not Be Too Late – Late Election Opportunities
For many spin-off transactions from prior years it may still be possible to make a Section 86.1 Election to reduce the amount of taxes payable related to the year of the spin-off transaction. Late elections are available within 10 years of the spin-off occurring. Amending previously submitted tax returns may also result in a sizable tax refund. Contact us for more information if you believe you may qualify for an opportunity to file a late Section 86.1 Election at information@canadiantaxelections.com.