Example – Instalment base – Transfers or rollovers
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Example – Instalment base – Transfers or rollovers
Example
On October 31, 2015, a corporation (transferor) disposed of all its property, through a section 85 rollover, to another corporation it was not dealing with at arm's length (transferee).
Note
Although the transferor may have an income tax liability for its tax year that includes the period July 1, 2015, to October 31, 2015, in which all or substantially all of its property has been disposed of, the actual tax assessed for that year will not be part of the transferee's instalment base in any year.
| Tax year-end | Tax payable (transferee) | Tax payable (transferor) |
|---|---|---|
| June 30, 2014 | $14,000 | $5,000 |
| June 30, 2015 | $12,000 | $6,000 |
| June 30, 2016* | $20,000 | N/A |
* For the current tax year ending on June 30, 2016, the transferee estimated its tax payable to be $20,000.
Before the rollover
For Regulation 5301(8), the instalment base amounts for the transferee's tax year that ends on June 30, 2016, would be:
- $12,000 for the first instalment base amount for the transferee's 2016 tax year; and
- $14,000 for the second instalment base amount for the transferee's 2016 tax year.
Four instalment payments of $1,000 each ($12,000 ÷ 12) are due up to October 31, 2015.
After the rollover
For Regulation 5301(8), the instalment base amounts for the transferee's tax year that ends on June 30, 2016, would be:
- $18,000 for the first instalment base amount for the transferee's 2016 tax year; and
- $19,000 for the second instalment base amount for the transferee's 2016 tax year.
The first instalment base amount of $18,000 is the total of the transferee's normal first instalment base amount of $12,000 and the transferor's first instalment base amount of $6,000 for its 2016 tax year.
The second instalment base amount of $19,000 is the total of the transferee's normal second instalment base amount of $14,000 and the transferor's second instalment base amount of $5,000 for its 2016 tax year.
Eight instalment payments of $1,500 each ($18,000 ÷ 12) are due up to June 30, 2016.
2017 tax year
For the tax year ending on June 30, 2017, the estimated tax payable is $27,000.
For Regulation 5301(8), the instalment base amounts for the transferee's tax year that ends on June 30, 2017, would be:
- $22,000 for the first instalment base amount for the transferee's 2017 tax year; and
- $18,000 for the second instalment base amount for the transferee's 2017 tax year.
The first instalment base amount of $22,000 is the total of the transferee's normal first instalment base amount of $20,000 and the transferor's first instalment base amount of $6,000 for its 2016 tax year, multiplied by the number of complete months in the transferee's 2016 tax year before the rollover, divided by 12. Calculate this amount as follows: ($6,000 × 4) ÷ 12 = $2,000.
The second instalment base amount of $18,000 is the total of the transferee's normal first instalment base amount of $12,000 for its 2016 tax year and the transferor's first instalment base amount of $6,000 for its 2016 tax year.
- Date modified:
- 2015-12-15