CRA confirms that the CSV-valuation rule in s. 70(5.3) applies to a foreign life insurance policy of a non-resident corporation whose shares were held by an immigrating individual
At the time a non-resident individual immigrated to Canada, the individual owned shares of a non-resident corporation which was the policyholder of a foreign life insurance policy on the life of the individual. On the immigration, there was a deemed disposition and acquisition of the shares for their FMV under s. 128.1(1)(b) and (c).
CRA indicated that, by virtue of s. 70(5.3), the shares were to be valued for such purposes by treating the policy as having a value equal to its cash surrender value.
In contrast, a foreign life insurance policy (which would not be an “excluded right or interest” under s. 128.1(10) – (f)) held by a non-resident corporation when it became resident in Canada would not be subject to s. 70(5.3), and for purposes of determining its deemed cost under s. 128.1(1)(c), “would be valued in accordance with normal valuation practices taking into consideration all facts relevant to the particular case.”
Neal Armstrong. Summary of 17 February 2022 External T.I. 2021-0882401E5 under s. 70(5.3).