Under specific circumstances, taxpayers or businesses can use an Election 85 Rollover to defer tax payments when transferring certain properties to other taxpayers or entities.

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Applicable Scenarios:

1. Transfer of property ownership between shareholders and a small business corporation.

2. Property ownership transfer between related corporations.

3. Property division in divorce settlements.

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Detailed Explanation:

Typically, during a property transfer, the property is deemed sold, and its sale price is considered equal to its fair market value. If the market value exceeds the original cost, a capital gain occurs, which subjects the transferor to capital gains tax. Conversely, a loss results in a capital loss.

Using an Election 85 Rollover, the transferor can choose a transfer amount, which then becomes the disposition value for tax purposes. This strategy allows the deferral of tax liabilities but does not eliminate them. While taxes must eventually be paid, deferring them can significantly enhance short-term cash flow, which is often crucial in financial decision-making.