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.
Principal Issues: Whether the taxpayer is required to include a taxable benefit from the payment of a premium by his ex-employer for a group term life insurance policy.
Position: None
Reasons: Question of fact. Provided general comments on the application of subsection 6(4) of the Act.
XXXXXXXXXX 2008-027444
A. Townsend
October 24, 2008
Dear XXXXXXXXXX :
Re: Group Term Life Insurance - Taxable Benefit
This is in response to your letter requesting an interpretation on the 2007 T4A you received reporting a taxable benefit from your group term life insurance policy.
More specifically, XXXXXXXXXX advised you that effective XXXXXXXXXX , your post retirement life insurance coverage under your group benefit plan with your former employer will be administered on a paid-up basis. As a result a new certificate was issued under a new group life insurance policy. Subsequently, you received a 2007 T4A that reported a taxable benefit of $XXXXXXXXXX in "Box 28". The explanation given with the T4A is that it is a premium paid to a Group Term Life Insurance Benefit.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office (the "TSO"). In your situation, since the transactions are completed, a request for an opinion should be addressed to the local TSO. We are, however, prepared to offer the following general comments, which may be assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").
Subsection 248(1) defines a "group term life insurance policy" as a policy under which the only amount payable by the insurer are amounts payable on the death or disability of individuals whose lives are insured because of either office or employment or former office or employment.
Pursuant to subsection 6(4), where at any time in a taxation year a taxpayer's life is insured under a group term life insurance policy, there shall be included in computing the taxpayer's income for the year from employment, the amount, if any, prescribed for the year in respect of the insurance. The prescribed amount is determined pursuant to sections 2700 to 2705 of the Income Tax Regulations (the "Regulations").
The Regulations prescribe for the purposes of subsection 6(4), the amount of the taxpayer's prepaid insurance benefit to be included in income in the year for a group term life insurance policy. The amount of the prepaid insurance benefit includes a lump-sum premium paid in the year. The Regulations define a "lump-sum premium" as a premium for insurance on an individual's life where all or part of the premium is for insurance for a period that extends more than 13 months after the payment of the premium.
We trust these comments are helpful.
Lita Krantz
Assistant Director
For Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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