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.
THE CONFERENCE FOR ADVANCED LIFE UNDERWRITING
1993 Annual Conference
Question 11
In paragraph 3 of lT-244R3, the Department states that the value of a life insurance policy assigned to a qualified donee under section 118.1 of the Act is the amount by which the cash surrender value of the policy at the time of the assignment, plus accumulated dividends and interest, exceeds outstanding policy loans. This is in apparent contradiction to previously published positions (in particular, paragraph 40 of Information Circular 89-3), in which the Department has stated that, where specific provisions such as subsection 70(5.3) do not apply, a variety of factors will be considered in determining the value of life insurance policies. These would include cash value but would also take into account such factors as the state of health of the insured and his or her life expectancy. As there is no specific provision in the Act for calculating the value of a life insurance policy for the purposes of section 118.1, can the Department explain why the factors set out in Information Circular 89-3 are not applicable for the purposes of section 118.1?
Response
Subsection 148(7) deems a person who disposes of a life insurance policy by way of gift to receive proceeds equal to the value of the policy as noted above. The comments in paragraph 3 of Interpretation Bulletin IT-244R3 were based on the position that the amount of the gift made by a person to a charitable organization would equal the proceeds of disposition of the life insurance policy to the individual.
As a result of this question, however, the Department will review the comments in paragraph 3 of Interpretation Bulletin IT-244R3 in connection with the comments in Information Circular 89-3 concerning the valuation of life insurance policies.
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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