CRA indicates that there is a double deduction of the ACB of a corporate held life insurance policy in computing the CDA addition to two corporate beneficiaries of the proceeds
As amended, para. (d) of the capital dividend account definition now provides that the addition to the CDA for life insurance proceeds is reduced by the adjusted cost basis of the policy to any policyholder (rather than only any ACB of the policy to the corporate recipient of the insurance proceeds). In the situation where there are two corporate beneficiaries (B and C) of a policy owned by a third corporation (A), CRA considers that the addition to the CDA of B and C on their receipt of the proceeds will be reduced by the full ACB of the policy to the policyholder (A). CRA stated:
The wording of subparagraph (d)(iii) does not provide for a proration of the ACB in cases of multiple corporate beneficiaries.
Neal Armstrong. Summary of 18 May 2017 CLHIA Roundtable, Q.1, 2017-0690311C6 under s. 89(1) – capital dividend account – s. (d)(iii).