To avoid multiple deductions of a life insurance policy’s ACB where there are multiple CCPC recipients of the death benefit, separate policies might be issued

Where a life insurance policy names several beneficiary corporations, the entire adjusted cost basis (ACB) of the policy is allocated to each of them for the purposes of computing their respective capital dividend accounts (CDAs), rather than being allocated in proportion to the death benefits received.

Suppose, for instance, that a holding company held a $2 million life insurance policy on the life of its main shareholder, having an ACB of $400,000, and two operating companies (A and B), were designated as the equal beneficiaries. Upon the death of the insured shareholder, each such beneficiary would receive a death benefit of $1 million. However, as reflected in 2017-0690311C6, the CDA for each corporation would be reduced by $400,000, rather than the policy ACB being allocated proportionately between the two corporations.

One solution would be for each of the two beneficiary corporations to purchase a separate $1 million policy on the life of the shareholder, with an ACB of $200,000. This would generally only result in a marginal change in the overall cost of the insurance as compared with a single policy, while avoiding the double deduction of the ACB.

Neal Armstrong. Summary of Gheys Jabbar, “Undue Reduction of the CDA for Multiple Beneficiaries of a Life Insurance Policy,” Canadian Tax Focus, Vol. 15, No. 4, September 2025, p. 11 under s. 89(1) – CDA – (d)(iii).