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.
XXX
We are writing in response to your correspondence of April 23, 1990 regarding the application of subsection 12.2(9) of the Income Tax Act (the "Act") to a certain hypothetical situation.
More specifically, you query concerns the application of subsection 12.2(9) to an exempt whole life insurance plan originally issued before December 1, 1982 which becomes a non-exempt plan at sometime after December 1, 1982 where there is neither a prescribed premium paid nor any prescribed increase in the death benefit under the policy. Prescribed premium and prescribed increase are terms defined in section 309 of the Income Tax Regulations.
Subsection 12.2(9) of the Act is applicable only to a situation in which a prescribed premium has been paid in conjunction with the fulfillment of either of the two conditions described in paragraphs (a) or (b) therein. If there has been no payment of a prescribed premium in respect of an interest in a life insurance policy last acquired on or before December 1, 1982, it is not relevant that the policy is not exempt or that there has been no prescribed increase in the death benefit. Subsection 12.2(9) would not have application in such circumstances.
In our telephone conversation of July 31, 1990 you stated, as a point of clarification, that one of the changes under consideration was a change from an ordinary life plan to an adjustable single premium life plan. We would advise that such an amendment may be so fundamental to the terms of the original policy as to constitute a disposition of that policy and an acquisition of a new policy at the time the amendment is instituted. Furthermore, such an amendment may result in either or both of the payment of a prescribed premium or a prescribed increase in the death benefit under the policy. The determination of the existence of any of these factors can only be made following a complete review of the facts pertaining to the actual policy amendment. In such circumstances it is possible that either the policy would be considered to have been last acquired after December 1, 1982 or the rules in subsection 12.2(9) would have application.
While we trust that our comments are of assistance to you, we would emphasize that they do not constitute an advance income tax ruling and are, therefore, not binding upon the Department in respect of any particular situation.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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