Class 10.1 or Class 10 after s85 rollover

Can a motor vehicle (truck) be classified as Class 10 following a s85 rollover, when it was classified as Class 10.1 when held in the shareholder’s hands?
Details: pickup truck was purchased by employee in 2013 and was used for employment purposes for a couple of years only - the truck was classified as Class 10.1 and CCA claimed for this period.
When the individual incorporated, the truck was rolled over via s85 at a FMV of approximately 20K. It was then used 100% for the construction business to transport materials, and haul a trailer (a second passenger vehicle was owned personally). Given the change in use and the FMV, should/can the classification be changed to Class 10, or does the classification flow-through from when the individual owned the vehicle? I cannot find any specific references to support either view, which would be most helpful.
Thanks in advance,

My recollection is that the class stays the same. The theory is that when you transfer the assets at their UCC amounts, the recipient company is deemed to have paid the original cost and claimed the CCA that the transferor has claimed. Also, the determination of the Class (10.1 or 10) is based on the use of the vehicle in the year of purchase.

EDIT - the ITA Regs for CCA under “Passenger Automobiles”, in Division III 1102(11) says that the cost to the taxpayer of an automobile, where it is acquired by a non-arm’s length person, is the greater of the actual cost to the taxpayer and the actual cost to the original owner.


Vehicles and depreciation is one of CRA’s favorite review targets.

I prefer to be a sure as possible of the facts and interpretations before finalizing bookkeeping and tax. When in doubt, I always call CRA advanced queue for CCA calcuations to review my statement of facts, identify the class, and verify the CCA rules to see if there are some ugly new surprises. An hour of my time up front can save me several days of pain, grief, and unpaid time lost in the future.

I had played reactive ping pong and silly nit picky three times in my early days as a professional tax preparer. Never again. Now I document my reasoning up front and have my CRA review bundle ready for each and every truck. If necessary, I ask for a CRA ruling.

Vehicle Class decision tree

1 - Gather vehicle data

fuel type
original cost
ownership per plate and insurance
business use %
business use to transport goods/equipment or other business purpose
extended cab Y/N
extended cab usage
parked at employee home or corporate location or both

2 - Determine type of vehicle as passenger of motor from vehicle definition chart

The kind of vehicle you own can affect the expenses you deduct. For income tax purposes, you should know the definitions of these four types of vehicles:
motor vehicles
passenger vehicles
zero-emission passenger vehicle (ZEPV)
zero-emission vehicle (ZEV)

5 - Class 10.1 vs Class 10

Class 10.1 refers to passenger vehicles only.

Class 10 refers to motor vehicles and some passenger vehicles

4 - Automobile

An automobile does not include:

a van, pickup truck, or similar vehicle that meets either of the following criteria:

can seat no more than the driver and two passengers, and in the year it is acquired or leased is used (50% or more of the distance driven) to transport goods or equipment in the course of business
in the year it is acquired or leased, it is used (90% or more of the distance driven) to transport goods, equipment, or passengers in the course of business


pickup trucks that you bought or leased in the tax year that meet both of the following criteria:
    are used (50% or more of the distance driven) to transport goods, equipment, or passengers in the course of earning or producing income
    are used at a remote work location or at a special work site that is at least 30 kilometres away from any community having a population of at least 40,000

If the back part or trunk of a van, pickup truck, or similar vehicle has been permanently altered and can no longer be used as a passenger vehicle, it is no longer considered an automobile as long as it is used primarily for business.

5 - Benefit calculation for motor vehicle not defined as an automobile

6 - Review CCA rules for vehicle for changes to depreciation such as acceleration

7 - Review GST rules for based on tax entity, ownership, % usage, benefit

More References

Tax Interpretations


Thank you, it was my impression that the classification would flow-through from the original non-arms length purchaser.
Are you saying that the corporation can record the vehicle on S8 with the original cost to the original owner under Class 10.1? That doesn’t seem right, as CCA will be calculated on the original cost twice (original cost with HST $54K; Class 10.1 limit in 2023 33,900 (with HST).

Thank you Dominique for your very comprehensive reply. I have most of those references in hand but appreciate the additional comments and tax interpretations. It is good advice to have all of the details for the determination of the class at hand.
I had contacted the Dedicated Tax Service (DTS) line for information, but the references they provided did not directly answer my question so I thought I would reach out to this knowledgeable group too. I find that the DTS does not like to provide any direct answers on a question. They only provide reference material.

That’s not what @kevin meant. With a section 85 rollover, the corporation assumes the contributor’s COST AND UCC values. The subsequent CCA is based on the UCC, but any future sale of the asset must use the original cost to determine if any capital gains are realized.

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You are correct that the Regs create the situation where the corp’n steps into the shoes of the original owner in terms of CCA. So if it was 10.1 before the transfer, it’s 10.1 after the transfer. There shouldn’t be any double-dipping in that situation.

Was there a time gap from when the truck was used in employment income and then transferred to the corp’n?

Thanks. That is what I expected but wanted to confirm. Yes, there was a 7 year gap between when it was used for employment purposes until it was transferred to the corporation.

I agree in a S85 rollover stuff would move in a class by class basis but why rollover this particular asset in the first place. The purpose of the rollover is to defer tax on the recapture by splitting the consideration of the fmv of the asset into cash and shares. But if in fact this vehicle was a 10.1 asset there is no recapture, therefore nothing to defer. If you record and document the transaction at FMV then on the T1 there is no income to report and if the current value of the vehicle is less than 30k and used 90 percent plus for business then it is class 10. Probably too late to fix now.

Thank you everyone for your thoughtful and helpful responses to my question. I greatly appreciate your expertise and time taken to provide these comments. This is a great forum.