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.
913461
Glen Thornley
(613) 957-2101
24(1)
Attention: 19(1)
January 30, 1992
Dear Sirs:
Re: Interpretation Bulletin IT-430R2
This is in reply to your letter of December 11, 1991 concerning the interaction of paragraphs 3 and 7 of IT-430R2 as it applies to the receipt of life insurance proceeds by a partnership, all the members of which are corporations. The proceeds of the life insurance policy, of which the partnership is owner and beneficiary, are received as a consequence of the death of a principal shareholder of one of the member corporations.
The position in paragraph 7 of IT-430R2 is predicated on the premise that the partnership, as owner of the policy, allocates the proceeds to the member corporation of which the deceased was the principal shareholder. This position has been taken to preserve the tax-free flow through of life insurance proceeds received as a consequence of the death of the person whose life was insured.
This position has been carried forward from the original IT-430 which was published on May 22, 1979 and is thus long-standing departmental policy as you have surmised.
Paragraph 7 has to be read in conjunction with paragraph 3 and the preceding paragraphs but the life insurance policy from which the proceeds, referred to above, are received does not necessarily have to be used as security for an indebtedness.
The treatment of life insurance proceeds received as a consequence of the death of the person whose life was insured as outlined in IT-430R2 are available in the circumstances set out in that bulletin. If you have a particular fact situation in mind you may wish to discuss it with personnel of your local taxation office. If, on the other hand, your facts relate to a particular proposed transaction you may wish to apply for an advance income tax ruling in accordance with the information in Information Circular 70-6R2.
We trust our comments will be of assistance to you.
Yours truly,
E. Wheelerfor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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