26 July 1996 External T.I. 9617955 - GROUP TERM LIFE INSURANCE

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.

		961795
XXXXXXXXXX		M. Eisner

Attention: XXXXXXXXXX

July 26, 1996

Dear Sirs:

Re: Paid-Up Life Insurance

This is in reply to your letter of May 15, 1996, concerning the above-noted subject.

You have inquired about the situation where an employer purchases paid-up life insurance for an employee to cover the employee during his or her lifetime. With respect to subsection 6(4) of the Income Tax Act and (Draft) Part XXVII of the Income Tax Regulations (the Regulations), the amount paid by the employer represents a "paid-up premium." In general terms, a paid-up premium, which is defined in draft subsection 2700(1) of the Regulations, is a premium for insurance for the remainder of an individual's lifetime, so that no further premiums will be payable for the insurance. Rather than the premium being treated in that manner, you have asked whether the premium could be regarded as being a part of an employee's "death benefit" for the purposes of the definition in section 248(1) of the Act.

In our view, the amount of the paid-up premium is taxable in accordance with the specific rules set out in subsection 6(4) of the Act and the Regulations. In addition, it is our view that no part of the paid-up premium could be considered to be an amount received "on or after the death of an employee," for the purposes of the definition of "death benefit" in subsection 248(1) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch