Words and Phrases - "operation of law"
19 November 2009 External T.I. 2007-0257251E5 F - Assurance-vie
If a corporation which is the owner and beneficiary of a life insurance policy changes the beneficiary to its subsidiary, does this change result in the disposition of the policy? CRA responded:
The definition of "disposition" in paragraph 148(9)(d) specifies that there may be a disposition of an interest in a life insurance policy solely by operation of law. In our view, a disposition by operation of law alone can occur if a change to the existing contract results in the creation of a new contract under the Civil Code of Québec. … According to paragraph 148(10)(d), a policyholder is deemed not to have disposed of or acquired an interest in a life insurance policy as a result only of the exercise of any provision of the policy. Generally, the … CRA … considers that the change of beneficiary, in and of itself, does not constitute an amendment that results in a disposition of the life insurance policy.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 148 - Subsection 148(10) - Paragraph 148(10)(d) | designation of a different beneficiary does not entail a disposition | 132 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | s. 15(1) benefit where sub is policyholder and premium payer and parent is beneficiary – but not for reverse | 223 |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (d) | CDA addition to beneficiary not reduced by ACB of policy to the different policyholder - but s. 246(1) or 245(2) germane | 195 |
Canadian Legal Information Institute v. The Queen, 2020 TCC 56
The appellant (CanLII) was a not-for-profit corporation that operated an open-access virtual law library. Its sole member was the Federation of Law Societies of Canada (Federation), which collecting fees from 14 law societies in Canada to fund all of CanLII’s operating budget of around $3 million per annum, and claimed input tax credits of over $0.7 million for the 27 month period in issue on its taxable purchases. The Minister disallowed these ITCs on the basis that CanLII provided its service for no consideration and, therefore, provided an exempt supply pursuant to Sched. V, Pt. V, s. 10.
In finding that CanLII instead was making a taxable supply, so that it was entitled to ITCs, Lamarre ACJ stated (at paras. 39-40):
… I note that the definition of “consideration” in [s. 123(1) of] the ETA … states that consideration “includes” any amount that is payable for a supply by operation of law. …
Therefore, I do not read the definition as imposing a requirement for an enforceable legal obligation to pay as argued by the respondent.
She went on to state (at paras. 50-51):
[A]lthough the Federation (through its council composed of representatives of each of the 14 law societies in Canada) determined the amount of the levy to be paid on an annual basis to CanLII on the latter’s recommendation, once that amount was in fact determined, the Federation had an obligation to pay such amount to CanLII. Further, the Council determined under the Governance Agreement (between the Federation and the law societies) the amount that each law society had to pay toward any such levy. The Federation only had discretion to determine the amount of the levy. Once established, the levy was payable to CanLII for the supply of the virtual library.
Therefore, I find that, by virtue of article 14 of the By-law and article 15 of the Governance Agreement, once the Federation had determined the amount of the annual levy, the levy was paid by operation of law for the supply of the virtual library. There was an obligation on the Federation to pay and payment was not discretionary as argued by the respondent.
In rejecting a Crown submission, she stated (at para. 54):
I agree with CanLII that a direct link exists between the payment of the levy by the Federation and the supply of the virtual library. …
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration | determination by NPO's member to pay NPO's budget gave rise to consideration by operation of law | 321 |