SEP 29 1987
Small Business and General Division G. Thornley (613)957-2130
XXXX
This is in reply to your memorandum of September 25, 1987, requesting that we reply to letters dated September 3 and September 22, 1987, XXXX
1) Each insured person under a group insurance plan "holds an interest in a life insurance policy", and that it is the date of acquisition of his or her interest in the policy that is relevant for the purposes of subsection 12.2(3) and (4) of the Act as well as for purposes of section 148 of the Act. This position follows from the fact that a plan member has the right to name his or her beneficiary.
2) Each insured person under a group insurance plan is considered to have an adjusted cost basis ("ACB") of his or her interest in the group plan. All amounts paid by the employee or on his behalf by the employer in respect of a premium under the policy with respect to all types of coverage, (subject to the limitation under the definition of premium in subparagraph 148(9)(e.1)(iii) of the Act), would be included in computing the employee's ACB. Additionally, pursuant to subparagraph 148(9)(a)(ix) of the Act, the ACB of a policy interest acquired after December 1, 1982 is reduced by the net cost of pure insurance in respect of that interest which is calculated immediately before the end of the calendar year ending in a taxation year commencing after May 31, 1985.
3) Amounts included in an employee's income pursuant to subsection 148(1) qualify for the interest deduction under subsection 110.1(3) of the Act subject to the limitation in subsection 110.1(1) of the Act.
We trust this is the information you require to respond to XXXX letters.
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch