CRA confirms that s. 83(2.1) does not apply to deny capital dividends sourced from life insurance proceeds

Canco, which has some undistributed cash and capital dividend account after having received life insurance proceeds, is sold to a third party (either directly, or through the sale of a Holdco). CRA confirmed that s. 83(2.1) would not apply to prevent the new owner from accessing this CDA given that the CDA was sourced from life insurance proceeds.

Neal Armstrong. Summary of 9 November 2017 External T.I. 2017-0704221E5 under s. 83(2.1).