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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
To get a deduction for insurance premiums on a life insurance policy used as collateral for a loan does the payor of the premiums have to be the policyholder as well.
Position:
Yes
Reasons:
Based on wording of subparagraph 20(1)(e.2)(i) and policy outlined in paragraph 1 of new IT-309R2.
952801
XXXXXXXXXX Michael Cooke
November 9, 1995
Dear Madam:
Re: Deductibility of Premiums on a Life Insurance Policy
This is in reply to your letter of October 19, 1995, wherein you requested our views as to the deductibility of life insurance premiums where a policy is used as collateral for a loan. Specifically, you requested that we confirm your understanding that a borrower need not be the named policyholder in order to obtain a deduction under paragraph 20(1)(e.2) of the Income Tax Act ("Act") (as noted in former Interpretation Bulletin IT-309R, dated January 10, 1979 at paragraph 6).
We are unable to confirm your view. IT-309R was cancelled and replaced by IT-309R2, dated February 28, 1995. In paragraph 1 of IT-309R2, the Department states that, "The taxpayer seeking the deduction must also be the policyholder for the premiums to be considered to be payable by the taxpayer under a life insurance policy and deductible under paragraph 20(1)(e.2)". In our view this is consistent with the wording of subparagraph 20(1)(e.2)(i) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
F. Lee Workman
Section Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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