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 ITA 148(8) applies to the transfer of a policy where the policyholders are the parents of the life insured (son) under the policy and the policy is transferred to their son for no consideration?
Position: Yes.
Reasons: ITA 148(8) refers to the transfer of an interest of a policyholder.
XXXXXXXXXX
2013-048138
Long Ip
(613)948-5273
June 5, 2013
Dear XXXXXXXXXX:
Re: Transfer of Life Insurance Policy
We are writing in response to your email dated March 6, 2013, wherein you asked if the transfer of a life insurance policy jointly owned by the parents to their adult son whose life is insured under the policy would qualify for the rollover under subsection 148(8) of the Income Tax Act (the "Act").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following general comments.
Our Comments
Subsection 148(8) of the Act provides that, if an interest of a policyholder in a life insurance policy (other than an annuity contract) is transferred to the policyholder's child for no consideration and a child of the policyholder is the person whose life is insured under the policy, the interest is deemed to have been disposed of by the policyholder for proceeds of the disposition equal to the adjusted cost basis of the interest immediately before the transfer, and to have been acquired by the person who acquired the interest at a cost equal to those proceeds.
In the situation described, it is our view that subsection 148(8) of the Act would apply to the transfer of each parent's interest in the life insurance policy to their son to the extent that the conditions specified in subsection 148(8) of the Act are met. The fact that the policy was jointly owned by the parents prior to the transfer would not, in and of itself, preclude the policy from being transferred at its adjusted cost basis pursuant to subsection 148(8) of the Act.
We trust these comments are of assistance.
Yours truly,
Jenie Leigh
Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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