CRA considers that life insurance policy premiums on a corporate-owned policy reduce safe income on hand if they do not increase the policy’s CSV

Where prior to a sale by Holdco of all the shares of Opco to an arm's length purchaser, Opco transfers a life insurance policy on the life of Holdco’s shareholder to Holdco through a dividend-in-kind, CRA considers that the resulting gain to Opco (based on the policy’s cash surrender value ("CSV")) will not increase the safe income on hand ("SIOH") for purposes of the sale because that time will be before the realization of that gain.

The (non-deductible) policy premiums that had been paid by Opco would reduce its SIOH except to the extent that their payment increased the policy’s CSV and thereby increased the accrued gain on the shares of Opco.

Neal Armstrong. Summaries of 14 May 2015 CLHIA Roundtable, Q. 5, 2015-0573821C6 under s. 55(2) and s. 148(7).