Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Whether index-linked variable life insurance policies which are not segregated fund policies for OSFI purposes, e.g. pursuant to section 450 of the Insurance Companies Act, are also not segregated funds for the purposes of section 138.1(1) of the ITA
Position: Unable to conclude.
Reasons: Insufficient information and tests under both statutes are different.
XXXXXXXXXX 2002-014753
K. Cooper, LL.B.
December 4, 2002
Dear Sirs:
Re. Index-Linked Life Insurance Policies
This is in reply to your letter dated June 18, 2002 in which you requested confirmation that index-linked life insurance policies will only be considered to segregated fund policies for all purposes of the Income Tax Act (the "Act") where the policies offer the policyholder the option of investing directly into a segregated fund.
In our view, the key characterization question for the purposes of determining whether a particular life insurance policy is a segregated fund policy for the purpose of section 138.1 of the Act is whether the insurer's reserves vary depending on the performance of a specified group of properties. This determination must be based on review of the actual policy under consideration and the insurer's accounting and valuation methodologies for determining its liabilities in respect of the policy. As discussed, should your members be prepared to provide us with detailed information in this regard we would be prepared to give this matter further consideration.
Yours truly,
Manager
Financial Institutions Team
Financial Industries Division
Income Tax Rulings
Policy and Legislation Branch
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