Corporation A is the sole owner and premium payor for a life insurance policy with a death benefit of $1 million on the life of Mr. A. Corporation B and Corporation C are each designated as beneficiaries for 50% of the death benefit under this policy. Mr. A dies after March 21, 2016 at a time when the ACB of the policy to Corporation A is $200,000. Is $400,000 added to the CDA of each of Corporation B and Corporation C?
Before indicating that the CDA addition for each corporation was $300,000 (=$500,000-$200,000), CRA stated:
Where there are multiple corporate beneficiaries designated under a policy…for the purposes of determining the addition to each beneficiary’s CDA, the portion of the death benefit received by each beneficiary must be reduced by the full ACB of a policyholder’s interest in the policy. The wording of subparagraph (d)(iii) does not provide for a proration of the ACB in cases of multiple corporate beneficiaries.