After referencing inter alia 2004-0065441C6, which indicated that an s. 148(8) rollover would not apply to a transfer of a life insurance policy under which more than one person is insured even where all the lives insured meet the definition of child, the questioner referred to Father, who has owned a life insurance policy on Child A’s life, transfers the policy to Child B, whom he regards as more financially responsible. Does this transfer occur on a rollover basis under s. 148(8)? CRA stated:
Subsection 148(8) … provides that, if an interest of a policyholder in a life insurance policy (other than an annuity contract) is transferred to the policyholder’s child for no consideration and a child of the policyholder or a child of the transferee is the person whose life is insured under the policy, the interest is deemed to have been disposed of by the policyholder for proceeds of the disposition equal to the adjusted cost basis of the interest immediately before the transfer, and to have been acquired … at a cost equal to those proceeds.
…[S]ubsection 148(8) of the Act would apply to the transfer of Father’s interest in the life insurance policy on the life of Child A to Child B.
We are not certain that the results described above are consistent with the intended policy of subsection 148(8), and it is therefore our intention to bring the matter to the attention of the Department of Finance … .