Quintal – Court of Quebec finds that amounts paid to a client to induce him to purchase a life insurance policy were income under s. 12(1)(x)
Quintal and other clients of an insurance broker (Chabot) participated in a scheme of Chabot to defraud life insurance companies, whose math depended on the commissions generated to Chabot from the sale of whole life policies substantially exceeding the premiums payable under those policies during the first two years of their term (beyond which, they could be cancelled without Chabot being required to repay his commissions). Chabot sold a large policy to Quintal, and Chabot’s company (Élan) paid Quintal in amounts equaling the premiums initially payable by him, with the policy subsequently being cancelled by the insurer after Quintal had ceased paying the premiums.
The principal (unsuccessful) argument of Quintal that the payments received by him from Élan were not includible in his income pursuant to the equivalent of s. 12(1)(x) was that those amounts were not received by him “in the course of earning income from … property.” However, Gosselin JCQ found that “even though the cash surrender value could not be cashed out by Mr. Quintal in the short term,” the cash surrender value of the policy started increasing immediately, and this was sufficient to satisfy the quoted requirement in s. 12(1)(x)(i)(A). Regarding the “inducement” requirement under the equivalent of s. 12(1)(x)(iii), she stated that the “advances paid to Mr. Quintal by Élan were inducement payments since without them … he would never have purchased such an insurance policy at such a cost.”
Neal Armstrong. Summary of Quintal v. Agence du revenu du Québec, 2023 QCCQ 37 under s. 12(1)(x).