19 March 1992 External T.I. 9200855 F - Dispostion of Life Isurance Policy Election Withdraw

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.

24(1)                         920085

N. Goldstein

(613) 957 3499

Attention:  19(1)

March 19, 1992

Dear Sir:

Re:  Future Withdrawals from a Life Insurance Policy

We are responding to your letter of December 23, 1991 in which you requested our views on the tax treatment of a new feature

24(1)

The concern raised is that the existence of the standing instructions, or the election, may be viewed as a partial settlement of the contract at the time that the election is made. If the furnishing of the election was viewed as a partial settlement, the policyholder would be considered to have disposed of a part of the policy and realized proceeds of disposition at the time the election is made.

We are unable to provide any definitive comments on the tax

implications of the proposed election feature, as the question of whether or not the election constitutes a disposition is one that can be answered only after reviewing the particular contract, the election and other surrounding facts. This can only done on an advance ruling basis with respect to a particular policy and policyholder. A copy of Information Circular 70-6R2 is enclosed for your reference in this regard.

We are, however, able to provide you with the following general comments. Providing that a particular insurance policy provides the policyholder with the right to make partial withdrawals from the savings account, it would seem to us that the furnishing of standing instructions or an election with respect to future withdrawals by the policyholder would not, in and of itself, normally constitute a disposition or part of a disposition of an interest in a life insurance policy at the time the standing instructions or election are made.

The foregoing comments do not constitute an advance tax ruling and, therefore, are not binding on the Minister of National Revenue.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate