S. 248(5) would apply where:
- Within 2 years of the s. 98(5) wind-up of a partnership that had held a policy on the life of the sole proprietor (A) for over 10 years, A donated the policy to a registered charity (a “donation”) (CRA indicated that the period of holding by the partnership would not count for s. 248(25) purposes);
- An individual transfers a newly-acquired policy for nil consideration to a wholly-owned corporation and, 35 months later, the corporation gifts the policy to a registered charity;
- A parent purchased a policy on the life of the parent’s 8-year old child and then gifted it to the child on attaining 21, with the child then making a donation within 3 years (s. 248(36) did not apply since the policy had been held by the parent for over 10 years); and
- A transfers a policy on A’s life that A had held for 15 years to A’s spouse (B) on a s. 146(8.1) rollover basis, and B makes the donation within 3 years thereafter (again s. 248(36) would not apply, and B’s gain under s. 148(7) would be attributed to A).
The last scenario above is varied by A holding the policy for only 2 years before gifting it to B, who makes the donation within the next year. Here, s. 248(36) would apply given that the policy was acquired by A within the 3 year period before the time of the gift by B, so that s. 248(36) in conjunction with s. 248(35) would restrict the FMV of the interest in the gifted policy to the least of its FMV otherwise determined, its ACB to B immediately before the gift and its ACB to A immediately before the gift to B (again, B’s gain under s. 148(7) would be attributed to A.)