Gestion Roy – Federal Court of Appeal confirms that a company’s payment of premiums on whole life policies where it was the beneficiary but not owner engaged ss. 15(1) and 246(1)

Various whole life policies on the life of a resident individual (Mr. Roy) were owned by (i) a holding company (“Gestion Roy”), controlled by Mr. Roy and which was the majority shareholder of a consulting firm (“R3D”), or by (ii) another holding company (“445 Canada”) which was wholly-owned by Mr. Roy but which was not a shareholder of R3D. However, R3D was the revocable beneficiary of any death benefits under the policies and paid all the premiums.

Boivin JA confirmed the inclusions in Gestion Roy’s income under s. 15(1) of the annual premium amounts paid on Gestion Roy’s policies for the reasons given in the Tax Court. Gestion Roy was the owner of such policies (entitling it to the cash surrender value of the policies at any time), so that it was “enriched” when the premiums were paid by R3D– and it was irrelevant to this point that, in fact, Gestion Roy never received any distribution on its policies. (What in fact occurred a number of years later was that, on the sale of R3D and R3D assets to a third-party purchaser, R3D received the cash surrender value of most of the policies on their termination.)

In also confirming the Tax Court’s finding that it followed from this that the payment by R3D of the premiums on the policies of 445 Canada resulted in corresponding inclusions under s. 246(1) to 445 Canada, Boivin JA stated:

[W]e agree with the TCC's conclusion that the analysis to be performed under subsection 246(1) is substantially the same as that required under subsection 15(1) (see Laliberté).

Neal Armstrong. Summaries of Gestion M.-A. Roy Inc. v. Canada, 2024 CAF 16 under s. 15(1) and s. 246(1).