Section 85 Notes


Important Take Aways from Dale et al. v. The Queen

Tax results are sometimes determined by laws outside of the Income Tax Act or the findings of the Tax Court. How and whether a legal transaction is recognized for tax purposes often turns on the terms of any agreements and whether the common law and legislative provisions of the jurisdiction in which the transaction is made find the transaction to be valid. If the legal transaction is valid and properly documented under the laws under which it was affected, the CRA is required to also find the legal transaction valid unless it has statutory authority to find otherwise.

Implementing a Section 85 rollover does not require the share consideration to be issued at the time the property is transferred, or even within the same tax year. The rollover does require that there be sufficient evidence of the obligation to issue the shares and that the shares be issued within a reasonable period of time given the circumstances.

Lastly, this case is a reminder that previous errors are not always fatal to a taxpayer's situation. Depending on the nature of the error, our experienced Canadian tax lawyers can implement strategies to correct outstanding errors.

This situation may have turned out well for Bernard and Paul Dale, but getting that positive result required years of litigation, expense and stress which could have been avoided if the shares had been properly issued in 1985 as intended.

With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, cryptocurrency traders, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax dispute resolution including tax audit representation and tax litigation. Visit and email David at Read the original version of this article on 

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