The parent corporation is the beneficiary of a life insurance policy while its subsidiary is the policyholder and pays the premiums. Does s. 15(1) apply in this (or in the reverse situation)? CRA responded:
In general, the CRA considers that subsection 15(1) would be applicable where a transaction or series of transactions would result in the impoverishment of a corporation and an economic benefit to a shareholder [then quoting Del Grande].
In a situation where the subsidiary owns and pays the premiums for a life insurance policy of which the parent corporation is the beneficiary, the CRA is of the view that the subsidiary would have conferred a benefit on its shareholder, the parent corporation, by paying the premiums for the life insurance policy. Consequently, subsection 15(1) should apply so that the parent corporation has to include in computing its income the value of the benefit that the subsidiary would have conferred on it as income from property.
The above interpretation represents a change in position from …. 2004-006546 … and will apply as of calendar year 2010. …
[W]here a parent corporation pays the premiums for a life insurance policy that it owns and of which the subsidiary is a beneficiary, there is no benefit to the shareholder under subsection 15(1).