Principal Issues: On a transfer of an interest in a life insurance policy by way of a dividend in kind after March 21, 2016, what will be the proceeds of the disposition to the transferor; the income inclusion to the transferee; and the adjusted cost basis (ACB) of the policy to the transferee?
Position: The proceeds of the disposition to the transferor and the ACB to the transferee would be the greatest of the cash surrender value, the consideration given for the interest and the ACB of the interest in the policy. The income inclusion to the transferee would be based on the FMV of the interest in the policy received.
Reasons: Subsections 148(7) and 82(1)