Words and Phrases - "used or held"

The taxpayer was a Canadian resident fraternal benefit society and a life insurer providing fraternal benefits, e.g., accident and sickness (“A&S”) benefits, and individual life insurance to its members.

The “World Surplus Assets” of the taxpayer were investment assets that were determined to be in excess of that needed for its life insurance divisions to have capital that was a comfortable multiple (around 3.1 X) of the minimum needed to be able to satisfy any claims that might be made against them. One of the issues addressed was whether the taxpayer was required to include its World Surplus Assets in computing its Canadian investment fund (CIF). This issue turned on whether the World Surplus Assets were “used or held in the course of carrying on an insurance business” as per the CIF definition.

Biringer J accepted the testimony of the taxpayer’s expert that indeed the World Surplus Assets represented assets that were in excess of those required to maintain the required margin of safety, so that, under the Ensite test, such assets were not required to be held in the life insurance business to avoid its destabilization. Furthermore, as a factual matter, the World Surplus Assets (which were managed in a separate fund) were not used or held in the life insurance business subject to exceptions where: such assets were used at any time in the year to top-up the capital of any division; they did not appear in the unconsolidated balance sheet of the taxpayer; and assets that the taxpayer had not established to have not been used to fund intangible assets used in the insurance businesses.