7 June 2017 External T.I. 2016-0671731E5 F - Transfer of life insurance policy by dividend in kind -- summary under Subsection 52(2)

A corporation (“Holdco”) holds a policy on the life of its sole shareholder with an adjusted cost basis (“ACB”), cash surrender value (“CSV”) and fair market value (“FMV”) of $200k, $240K and $450K, respectively. If Holdco transfers the policy to its shareholder as a dividend in kind, its proceeds of disposition (and his cost) will be only the CSV of $240K (so that its gain is $40K), since the FMV of the consideration received by it is nil.

CRA did not mention s. 52(2).