Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Are death benefits to be paid periodically exempt from taxation?
Position:
No. The periodic payments are taxable.
Reasons:
Paragraph 56(1)(d) applies since the periodic payments are annuity payments.
XXXXXXXXXX 980317
Attention: XXXXXXXXXX
March 12, 1998
Dear Sir:
Re: Taxation of Life Insurance Proceeds
This is in reply to your facsimile of February 9 and 23, 1998 wherein you requested our views as to the taxation of periodic payments made to the beneficiary of a life insurance policy instead of a lump sum death benefit.
You referred to a specific product issued by a life insurance company in Canada but you have not provided us at this time with a copy of this product. Should you wish to proceed with a request for an advance income tax ruling with respect to the proposed issuance of the product you are referring to in your facsimile it should be submitted in the manner set out in Information Circular 70-6R3 dated December 30, 1996. As noted, in considering such a request, the Department would require a complete description of all the relevant facts and documentation relating to the proposed transactions to be entered into by the parties.
Consequently, at this time, we can only give you our general comments. We are of the view that the present legislation in the Income Tax Act (“Act”) would include the periodic payments referred to above in income pursuant to paragraph 56(1)(d) of the Act. It is a question of fact as to whether or not a deduction would be available pursuant to paragraph 60(a) of the Act. The determination of the amount, if any, deductible pursuant to paragraph 60(a) of the Act can only be made following the review of the specific product.
We hope our comments are of assistance to you.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings & Interpretation Directorate
Policy & Legislation Branch
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