| 24(1) | 5-902787 |
| A. Seidel | |
| (613) 957-8960 |
19(1)
November 27, 1990
19(1)
The Kitchener District Office has referred your letter dated September 26, 1990, for our reply. You have requested clarification with respect to the application of subsection 148(8) of the Income Tax Act (the "Act") when transferring ownership of a life insurance contract (other than an annuity contract).
Subsection 148(1) requires that the proceeds of disposition of an interest in a life insurance policy which a policyholder becomes entitled to receive in a year must be included in income to the extent that the proceeds exceed the adjusted cost basis to the policyholder of that interest in the policy immediately before its disposition.
Subsection 148(8) of the Act makes limited provision for the "roll-over" of an interest in a life insurance policy at its adjusted cost basis. Subsection 148(8) of the Act will be applicable provided that the transferee is a person described in any of subparagraphs 148(8)(a)(i), (ii) or (iii) and provided that the person whose life is insured is described in paragraph 148(8)(b) of the Act.
Accordingly, the "roll-over" in subsection 148(8) of the Act will only apply in circumstances where both of paragraphs 148(8)(a) and (b) of the Act are satisfied. This would not be the case where a policyholder transfers an interest in a policy to a sibling unless that sibling is an individual described in subparagraph 148(9)(a)(iii) of the Act. We would also note that unless the transfer of a policyholder's interest is made both directly and immediately upon death to a person described in paragraph 148(8)(a) of the Act, subsection 148(2) of the Act will have application.
While we hope our comments are of assistance to you they do not constitute an advance income tax ruling and therefore are not binding on the Department in respect of a specific situation.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate