A corporate owner and beneficiary of a life insurance policy receives a death benefit in the amount of $850,000, less a policy loan of $150,000 ($1,000,000 - $150,000) in accordance with the terms of the life insurance policy. After finding that the ACB immediately before death, was $50,000 ($200,000 - $150,000), CRA stated:
In general, where the terms of a life insurance policy provide that following the death of the insured, the beneficiary is entitled to receive as a death benefit an amount that is obtained after deducting the policy loan on death, we will consider the net amount received to be the proceeds of a life insurance policy for CDA purposes.
Consequently … the amount to be included in the CDA will be $800,000, which is the proceeds of the life insurance policy ($850,000) received by the corporation as a result of the insured's death less the ACB of that policy to the corporation ($50,000) immediately before death.