A non-resident individual, upon becoming resident in Canada, owned shares of a non-resident corporation (Foreignco A) which was the policyholder of a foreign life insurance policy on the life of the immigrating individual. CRA stated:
[S]ubsection 70(5.3) … would apply … for the purpose of determining the FMV of the Foreignco A shares owned by the individual at the time of disposition [under s.] 128.1(1)(b) … . [T]he FMV of the Foreignco A shares owned by the non-resident individual would be determined as though the FMV of the corporate-owned foreign life insurance policy were the policy’s cash surrender value.
However, a foreign life insurance policy (which CRA intimated would not be an “excluded right or interest under para. (l) of the definition in s. 128.1(10)) held by a non-resident corporation when it became resident in Canada would not be subject to s. 70(5.3), and for purposes of determining its deemed cost under s. 128.1(1)(c), it “would be valued in accordance with normal valuation practices taking into consideration all facts relevant to the particular case.”