In 2023-0990531C6, CRA indicated that, where a life insurance policy is distributed by a personal trust in satisfaction of an income interest in the trust, there would be a disposition of that interest and of the policy at FMV, irrespective of which of s. 106(3) or 107(2) applied. CRA confirmed that this did not call into question its earlier positions in inter alia 2011-0391781E5 that where an interest in a life insurance policy held by a personal trust is distributed to a resident beneficiary in full or partial satisfaction of the beneficiary's capital interest, s. 107(2) (assuming its conditions were satisfied) would prevail over s. 148(7), so that s. 107(2) rollover treatment would apply.
Neal Armstrong. Summary of 10 October 2024 APFF Financial Strategies & Instruments Roundtable, Q.10 under s. 148(7).