CRA indicates that the s. 148(8) rollover can apply on a policy transfer to a substituted child

S. 148(8) provides that, if an interest of a policyholder in a life insurance policy is transferred to the policyholder’s child for no consideration and a child of the policyholder is the person whose life is insured, the interest is deemed to have been disposed of on a rollover basis (based on the adjusted cost basis of the interest).

CRA has previously indicated that an s. 148(8) rollover would not apply to a transfer of a life insurance policy under which more than one person is insured even where all the lives insured meet the definition of child. However, CRA has now indicated that where Father, who has owned a life insurance policy on Child A’s life, transfers the policy to Child B, whom he regards as more financially responsible, the transfer occurs on a rollover basis.

CRA indicated that it is not certain the this result is “consistent with the intended policy of subsection 148(8)" and is referring this matter to Finance.

Neal Armstrong. Summary of 8 May 2018 CALU Roundtable Q. 3, 2018-0745831C6 under s. 148(8).