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.
Principal Issues: Whether the views expressed in technical interpretation E9824645 still reflect the CRA's position with respect to the tax implications of a corporate-owned life insurance policy where the parent is the beneficiary.
Position: It remains the CRA's position that generally subsection 15(1) will not apply with respect to the situation described in interpretation E9824645. In terms of the GAAR, it is our current practice to comment on the application of the GAAR only after reviewing all the facts and circumstances of a transaction in connection with an advance ruling request.
Reasons: See interpretation E9824645.
CALU - Conference for Advanced Life Underwriting (2004)
Question 8
Corporate-Owned Life Insurance
In a technical interpretation letter dated December 15, 1998 (E9824645), the Agency considered the situation where Parentco is the beneficiary of an insurance policy on the life of its controlling shareholder, and Subco, a wholly-owned subsidiary of Parentco, is the owner of the policy and pays the premiums under policy. The Agency expressed the view that "generally subsection 15(1) of the Act would not apply to include a benefit in a beneficiary's income as a consequence of the policyholder paying the premiums due under the policy or upon receipt by the beneficiary of the proceeds of the life insurance policy as a consequence of the death of the life insured". The Agency's response also noted that unless there was a bona fide reason for this structure, other than to obtain a tax benefit, the GAAR could be applied to reduce the amount of the life insurance proceeds to be included in the capital dividend account of Parentco by the adjusted cost basis of the policy to Subco.
Question:
Will the Agency confirm that the views expressed in this technical interpretation letter still reflect the Agency's position?
Agency's Response
It remains the Agency's position that generally subsection 15(1) of the Act will not apply with respect to the situation described in our technical interpretation (E9824645). Concerns regarding the potential application of subsection 15(1) of the Act in other situations involving corporate-owned life insurance policies should be submitted to this Directorate for consideration by way of an advance income tax ruling request in the case of proposed transactions or to the local tax services office in the case of completed transactions.
With regard to the GAAR, it is currently the Agency's practice to comment on the application of subsection 245(2) of the Act only after reviewing all the facts and circumstances of a transaction in connection with a request for an advance ruling.
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