15 December 1999 External T.I. 9924375 - EMPLOYMENT BENEFIT -NON-GROUP TERM LIFE

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: The income tax treatment of a life-insurance policy, other than a group term life insurance policy, provided to an employee.

Position: Taxable under paragraph 6(1)(a).

Reasons: Straightforward interpretation.

XXXXXXXXXX 	J. Gibbons
		5-992437
Attention: XXXXXXXXXX 

December 15, 1999

Dear XXXXXXXXXX:

We are replying to your letter of August 10, 1999, in which you requested clarification regarding the income tax treatment of a life-insurance policy provided to one of your employees. You indicated that the particular policy is not a group term life insurance policy, so that subsection 6(4) of the Income Tax Act does not apply, and the beneficiary of the policy will be the employee's wife.

As indicated in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996, a request for a written opinion on a completed transaction is generally considered by a taxpayer's local tax services office. Accordingly, you may wish to submit all relevant facts and documentation to the appropriate Tax Services Office for their comments. We are, however, prepared to provide some general comments.

In paragraph 20 of Interpretation Bulletin IT-529, "Flexible Employee Benefit Programs," we state that the value of the benefit derived from life insurance coverage under a policy which is not a group term life insurance policy would ordinarily be the amount of premium paid by the employer in respect of such coverage. Accordingly, the premium paid by your company would be included as a taxable benefit on a T4 slip and would be a deduction in computing the company's business income. This result, however, is based on the presumption that the benefit is an employment benefit.

Where benefits are provided to an employee who is also a shareholder, the income tax results will differ from that described above if the benefits are received or enjoyed by the particular individual in his or her capacity as shareholder. If only a shareholder receives the additional life insurance coverage, and other employees who are not shareholders are not provided with such coverage, it will normally be reasonable to conclude that the employee-shareholder has obtained the benefit by reason of his or her shareholdings and not by reason of his or her employment. If a benefit is a shareholder benefit, the amount is included in the individual's income by virtue of subsection 15(1) of the Act, and also there is no business deduction to the corporation for the payment of the premium.

We trust that these comments will be of assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate

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