| 24(1) | 5-900958 |
| D.S. Delorey | |
| (613) 957-3495 | |
| Attention: 19(1) | EACC9467 |
July 5, 1990
Dear Madam:
This is further to our letter of April 23, 1990 concerning the use of family allowance benefits by parents to purchase life insurance products (particularly deferred annuities and segregated fund annuities) on behalf of their children.
We note that your enquiry relates to a proposed transaction. As explained in Information Circular 70-6R (copy enclosed), the Department does not provide written opinions on proposed transactions other than in reply to advance ruling requests submitted in the manner set out in that Circular. We offer however the following general comments.
The practice set out in paragraph 16(a) of Information Circular 70-6R, referred to in your letter of March 20, 1990 applies to any type of investment including life insurance products. Thus, where family allowance benefits received for a child are used by a parent to acquire a life insurance policy that can be readily identified as property of the child, any income earned on the policy is considered to be income of the child.
As indicated in line 2 of the above-mentioned paragraph 16(a), the practice described therein applies whether or not the investment is held in a trust. Where such is the case, it is not necessary for T3 returns to be filed on behalf of a trust that has no other property.
The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of the enclosed Information Circular 70-6R. We trust however that they are of assistance to you.
Yours truly,
DirectorFinancial Industries DivisionRulings Directorate