Dear Sirs:
Re: Request for an Advance Income Tax Ruling
We are writing in response to your correspondence of August 22, 1991 wherein you had requested an advance income tax ruling with respect to a proposed new insurance product which was described by yourself as
24(1)
More particularly, you had requested our confirmation that this product would not be an "accumulation product" for the purposes of section 12.2 of the Income Tax Act (the "Act") which provides for the inclusion in income for income tax purposes of a policyholder of certain amounts derived from the holding of an interest of a life insurance policy.
Generally, section 12.2 of the Act applies with respect to all insurance policies other than "exempt policies" as that particular term is defined in paragraph 12.2(11)(a) of the Act in accordance with section 306 of the Income Tax Regulations (the "Regulations"). The determination of the "exempt" status of any particular life insurance policy is to be performed "at any time" during which the policy, is in effect. Consequently, we are not able to provide an opinion as to the possible "exempt" status of the policy. We would also note that it will always be a question of fact to be determined at any particular time whether the policy in question is, or alternatively is not, an "exempt policy" at that time.
Furthermore, this determination is to be performed on an individual policy basis which requirement additionally prevents us from commenting on the "exempt status" of any particular generic insurance product.
You had requested that we comment on the conceptual merits of the proposed product as being within the framework of the "exemption test policy" as that policy is defined in section 306 of the Regulations. As this Department deals primarily with factual transactions, we are unable to comment on the conceptual or hypothetical merits of any particular proposed new insurance product, however, should you wish to discuss these concepts further, you may wish to address your concerns to the Tax Legislation Division, Tax Policy Branch of the Department of Finance which is responsible for the formulation of the relevant legislation and associated regulations. We would note, however, that the determination of whether any policy is an "exempt policy" must be made on the basis of the specific provisions of the Act and Regulations.
We apologize for the lengthy delay in responding to your enquiry, however, we also trust that we have fully explained the position of the Department with respect to the nature of the comments requested and the reasons we are not able to provide the assurances requested in your letter.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch