5 June 1990 Internal T.I. 59709 F - Split-dollar 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.

19(1)

June 5, 1990

Dear Sir:

This is in reply to your letter dated March 5, 1990 in which you requested information with respect to split-dollar life insurance.

We regret to inform you that Revenue Canada - Taxation has not developed a "pure term insurance rate table".

For your information we are attaching a copy of the question and answer dealing with split-dollar life insurance which was presented as part of the round table discussion at the 1989 Canadian Tax Foundation Tax Conference.

We apologize that we cannot be of more assistance to you.

Yours truly,

F. Lee Workman for DirectorFinancial Industries DivisionRulings Directorate

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SPLIT DOLLAR LIFE INSURANCE

QUESTION 24

Under a typical split dollar life insurance plan, the company of which the mortality beneficiary is an employee or shareholder, pays that portion of the premium equivalent to the annual increase in the cash surrender value and the employee/shareholder pays the balance, if any.  The company is then entitled to the cash  surrender value on surrender.  On death the employee/shareholder will be entitled to a specified amount and the company will be entitled to an amount equivalent to the cash surrender value immediately before death.  Is it Revenue Canada's view that the employee/shareholder receives a benefit in the situation described above?

DEPARTMENT'S POSITION

It is a question of fact whether or not an employee/shareholder receives a benefit, under a split-dollar life insurance plan, which is to be included in income pursuant to paragraph 6(1)(a) or subsection 15(1).

In determining whether an employee/shareholder is in receipt of a benefit in a particular taxation year consideration will be given to the premiums paid by an employee/shareholder, if any, under the policy and the premium cost for equivalent term coverage.