Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: a) Would the CCRA please confirm that the position stated in Technical News No. 10 still reflects the CCRA's position? b)Please comment on when a revised version of IT-430R3 will be issued?
Position: a) The view expressed in Technical News No. 10 remains CCRA's position on life insurance policies assigned as collateral for securing indebtedness where the debtor remains the beneficiary under the policy. b) A consolidation of IT-430R3 to include the position expressed in Technical News No. 10 should be issued before the end of the year.
Reasons: None
CALU - Conference for Advanced Life Underwriting, May 7, 2002
Question 2
IT-430R3, paragraph 6 [Life Insurance Proceeds Received by a Private Corporation or a Partnership as a Consequence of Death]
Paragraph 6 of IT-430R3 reads, in part, as follows:
"A life insurance policy may be used to secure the indebtedness of a private corporation or a partnership with part or all of the proceeds arising upon the death of the person whose life was insured being paid directly to the creditor as beneficiary or as an assignee for security. In such cases, whether or not the premium cost is borne directly or indirectly by the debtor, the entitlement to the addition to the capital dividend account (or the entitlement of its partners to an addition to the adjusted cost base of each of their partnership interests) remains with that creditor (or its partners)."
Income Tax Technical News No. 10, dated July 11, 1997, stated that "[I]t was not intended that there be a change in the Department's position with regard to situations where a life insurance policy has been assigned as collateral for securing indebtedness, as opposed to an absolute assignment of the policy, and the debtor remains beneficiary under the policy. In such a case, as the proceeds of the insurance policy would be constructively received by the debtor/beneficiary, even though paid directly to the creditor in accordance with the assignment, the proceeds in excess of the adjusted cost basis of the policy would be included in the capital dividend account of the debtor. Paragraph 6 of IT-430R3 will be revised in this regard."
Questions:
a) Would the CCRA please confirm that the position stated in Technical News No. 10 still reflects the CCRA's position?
b) Please comment on when a revised version of IT-430R3 will be issued?
Agency's Response
a) The view expressed in Technical News No. 10 remains CCRA's position on life insurance policies assigned as collateral for securing indebtedness where the debtor remains the beneficiary under the policy.
b) We have received a request from the Association de planification fiscale et financière (APFF) in Quebec to reconsider our position that the view expressed in Technical News No. 10 does not apply to hypothecary claims in Quebec. A consolidation of IT-430R3 to include the position expressed in Technical News No. 10 will be issued once our review is complete, likely before the end of the year.
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