Holdco, and its subsidiary Opco, enter into a split-dollar insurance arrangement. They "purchase together permanent life insurance policy on the life of the key man," and agree that they will jointly make the beneficiary designations on the policy so that Holdco will be the owner of the cash surrender value of the policy, and will be entitled to the death benefit attributable to the cash surrender value of the policy; and Opco will be entitled to the death benefit attributable to mortality gain and not that portion attributable to the cash surrender value of the policy. They further agree that each will fund that portion of premiums under the policy relating to that corporation's respective interest in the policy. CRA stated:
CRA has consistently expressed the view that where a life insurance policy is co-owned by a corporation and its shareholder (corporation or individual) pursuant to a split dollar arrangement or other shared ownership arrangement, there is a potential for the corporation to confer a benefit on that shareholder through the premium sharing arrangement. Where the premium paid by the shareholder is less than that which would be paid for comparable rights available in the market under a separate insurance policy, the corporation may be viewed as having conferred a benefit to the shareholder that could result in a shareholder's benefit for the purpose of subsection 15(1) of the Act.