9 July 1998 External T.I. 9813525 - TAXABLE BENEFIT - LIFE INSURANCE PREMIUMS

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: Would the payment by a corporation of the annual premiums for a life insurance policy on the life of a shareholder constitute a taxable benefit to the shareholder pursuant to subsection 15(1) where the corporation is the policyholder and also the beneficiary.

Position: Not a taxable benefit.

Reasons: It is a question of fact as to whether or not an individual has received a shareholder-related benefit pursuant to subsection 15(1) of the Act. However, where a corporation is the policyholder and beneficiary of a life insurance policy on the life of a shareholder, and pays the annual premiums with respect to such policy, the premiums would not ordinarily constitute a taxable benefit to the shareholder under subsection 15(1) of the Act.

981352

XXXXXXXXXX								T. Lanzer
(613) 957-2129
Attention:	xxxxxxxxxx

July 9, 1998

Dear Sirs:

Re: Subsection 15(1) - Taxable Benefit

We are writing in response to your letter of May 26, 1998 wherein you requested our opinion as to whether the payment of insurance premiums by a corporation for a life insurance policy on the life of its sole shareholder would be considered to be a taxable benefit to the shareholder pursuant to subsection 15(1) or any other provision of the Income Tax Act ("the Act").

In your situation:

1. Mr. A owns 100% of Aco;

2. Aco is a Canadian-controlled private corporation (a "CCPC")

3. On an annual basis, Aco pays life insurance premiums with respect to a policy on the life of Mr. A;

4. Aco is the sole beneficiary of the life insurance policy:

5. Pursuant to an agreement between Aco and Mr. A, Aco will repurchase the shares held by Mr. A upon his death pursuant to a shareholders agreement similar to those contemplated in the grandfathering provisions contained in section 112 of the Act.

The issue to be determined is whether the payment by Aco of the annual premiums with respect to a life insurance policy on the life of Mr. A would be considered to be a taxable benefit to Mr. A pursuant to subsection 15(1) of the Act.

Our Comments

It is a question of fact as to whether or not an individual has received a shareholder-related benefit pursuant to subsection 15(1) of the Act. However, where a corporation is the policyholder and beneficiary of a life insurance policy on the life of a shareholder, and the corporation pays the annual premiums with respect to such policy, it is our view that the premiums on such a policy would not ordinarily constitute a taxable benefit to the shareholder under subsection 15(1) of the Act.

In accordance with paragraph 22 of Information Circular 70-6R3, the opinions expressed in this letter are not income tax rulings and are, therefore, not binding on the Department.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch