Income Tax Severed Letters - 2004-07-02

Principal Issues: 1) Whether the expression "controlled, directly or indirectly in any manner whatever" includes "de jure control"?
2) What are the consequences of the application of subsection 256(6)?

Position: 1) Yes.
2) The controlled corporation is deemed not to have been controlled in fact or in law by the controller at the particular time.

Reasons: The Law and previous positions.

Principal Issues: We are asked whether a disposition of an interest in a life insurance policy occurs in each of five arrangements involving universal life policies.

Position: The payment described in the first arrangement probably does not constitute a disposition as defined in subsection 148(9) of the Act. The terms and conditions of the particular polices would be relevant in determining whether or not dispositions result in any of the remaining arrangements.

Reasons: A "disposition" defined in subsection 148(9) excludes payments made as a consequence of the death of a person whose life is insured under the policy. The factual circumstances including the terms and conditions of the particular policy determine whether a particular payment is made as a consequence of a person's death.

Principal Issues: Whether an annuitant can reduce the cost amount of the property in his RRSP by transferring all the property in the RRSP from one trustee to another for the purpose of reducing the foreign content in his RRSP.

Position: No.

Reasons: Where the conditions set out under paragraph 248(1)(g) are met, the transfer of the RRSP from one trustee to another will not result in a disposition. Consequently, the transfer will qualify for rollover and the cost amount to the transferee will be equal to the cost amount of the property before the transfer.