Professionals practising through a professional corporation hold a group term life insurance certificate as an insured, for which the policyholder is a professional association of which the insured is a member. They transfer the insurance certificate to their corporation so that it pays the premiums and receives the insurance proceeds on their death.
Would the life insurance proceeds paid to the corporation as a result of the death of the insured be added in the calculation of the capital dividend account ("CDA") under s. (d)(ii) the definition? Would the answer be the same if, by law, the insurance certificate were to continue to be issued in the name of the insured individual and the corporation was designated as the beneficiary of the proceeds of the insurance and paid the insurance premiums?
CRA responded:
Where a corporation is the beneficiary of a group term life insurance policy (of which the corporation was not a beneficiary on or before June 28, 1982) and receives proceeds of the insurance policy as a result of the death of a member who has designated the corporation as a beneficiary by virtue of the master agreement for the policy, the proceeds may ordinarily be added in the calculation of the corporation's CDA pursuant to subparagraph (d)(ii) of the CDA definition in subsection 89(1).