I-3 - Taxation Act

Section 966 Disposition versions

2019-06-19

966. In this Title and sections 92.11 to 92.19,

(a)  “disposition”, in relation to an interest in a life insurance policy, includes the surrender of the policy, a policy loan made after 31 March 1978 in respect of the policy, the dissolution of that interest by virtue of the maturity of the policy, the disposition of that interest by operation of law only, and a particular payment which is not an annuity payment, a policy loan or a policy dividend and which is paid by the insurer in respect of the policy where the latter is not a policy contemplated in the second paragraph of section 968 and is a life annuity contract, within the meaning of the regulations, entered into after 16 November 1978 and before 13 November 1981, buy does not include

i.  a payment under a policy as a disability benefit or as an accidental death benefit;

ii.  the assignment of all or any part of an interest in the policy for the purpose of securing a debt or a loan other than a policy loan;

iii.  the lapse of the policy in consequence of non-payment of the premiums, if the policy was reinstated within the 60 days after the end of the calendar year in which the lapse occurred;

iv.  an annuity payment;

v.  a payment made under the policy in consequence of the death of any person whose life was insured under the policy if the policy is not an annuity contract and if it was last acquired before 2 December 1982 or is an exempt policy;

vi.  any event or transaction by which an individual becomes entitled to receive, under the terms of an exempt policy, all of the proceeds, including or excluding policy dividends, payable under the policy in the form of an annuity contract or annuity payments, if, at the time of the event or transaction, the individual whose life is insured under the policy was totally and permanently disabled;

(a.1)  “insurer” or “life insurer” includes a person who is licensed or otherwise authorized under a law of Canada or a province to issue contracts that are annuity contracts;

(a.1.1)  “policy loan” means an amount advanced by an insurer to a policyholder in accordance with the terms and conditions of a life insurance policy;

(a.2)  “child” of a policyholder includes a child as defined in subparagraph d of the first paragraph of section 451;

(b)  “segregated fund trust”, “segregated fund”, “interest” and “amount payable” have the meaning assigned by section 835;

(b.1)  “person whose life was insured” includes an annuitant under a life annuity contract, within the meaning of the regulations, entered into before 17 November 1978;

(b.2)  (paragraph repealed);

(b.3)  “premium” under a life insurance policy includes a prepaid premium under the policy which is refundable only on termination or cancellation of the policy and interest paid after 31 December 1977 to a life insurer in respect of a policy loan in respect of the policy, except such interest deductible after 31 December 1980 in accordance with sections 160 to 163.1, but does not include the portion of any amount paid under the policy with respect to an accidental death benefit, a disability benefit, an additional risk as a result of insuring a substandard life, an additional risk in respect of the conversion of a term policy into another policy after the end of the year, an additional risk under a settlement option, or an additional risk under a guaranteed insurability benefit, if

i.  in the case of an annuity contract, a policy issued before 1 January 2017 or a policy in respect of which the particular time at which the policy is issued is determined under section 967.1, where the interest in the policy was last acquired after 1 December 1982, the payment is made after 31 May 1985 and, if the particular time at which the policy is issued is determined under section 967.1, before the particular time, or

ii.  in the case where the individual’s interest in the policy was last acquired before 2 December 1982, subsection 9 of section 12.2 of the Income Tax Act (R.S.C. 1952, c. 148) applies to the interest, the particular time at which the policy is issued is determined under section 967.1 and the payment is made in the period that starts on the later of 31 May 1985 and the first day on which that subsection 9 applies in respect of the interest and that ends at the particular time;

(b.4)  “proceeds of the disposition” of an interest in a life insurance policy means the amount of the proceeds that the policyholder, beneficiary or assignee, as the case may be, is entitled to receive on a disposition of such interest and also means,

i.  in respect of a surrender or maturity of the policy, the amount by which the cash surrender value of that interest in the policy at the time of surrender or maturity, excluding that portion of the cash surrender value that is applicable to a policyholder’s interest in the segregated fund trust related to that policy as referred to in section 851.11, exceeds the aggregate of all amounts each of which is

(1)  an amount that reduces, because of the disposition, the amount payable in respect of a policy loan in respect of the policy but, in the case where the policy is issued after 31 December 2016, the disposition is of a part of the interest and, if the particular time at which the policy is issued is determined under section 967.1, the disposition occurs at or after the particular time, only to the extent that the amount represents the portion of the loan applied, immediately after the loan, to pay a premium under the policy, as provided for under the terms and conditions of the policy,

(2)  a premium under the policy that is due but unpaid at that time, or

(3)  an amount applied, immediately after the time of the surrender, to pay a premium under the policy, as provided for under the terms and conditions of the policy;

ii.  in respect of a policy loan in respect of that policy made after 31 March 1978, the lesser of

(1)  the amount of the loan, other than the part thereof applied, immediately after the loan, to pay a premium under the policy, as provided for under the terms and conditions of the policy, and

(2)  the amount by which the cash surrender value of the policy immediately before the loan is made exceeds the aggregate of the amounts outstanding at that time in respect of policy loans in respect of the policy;

iii.  in respect of a particular payment referred to in paragraph a, the amount of the payment;

iv.  in respect of a deemed disposition described in paragraph b of section 967, the accumulating fund in respect of the interest, as determined in prescribed manner, immediately before the time of death in respect of a life insurance policy other than an annuity contract, last acquired after 1 December 1982, or immediately after the time of death in respect of an annuity contract;

(c)  “value”, at a particular time, of an interest in a life insurance policy means, when the interest includes an interest in the cash surrender value of the policy, the amount to which the holder of the interest would be entitled if the policy were surrendered at that time; such value is nil in other cases; and

(d)  “cash surrender value” at a particular time of a life insurance policy means its cash surrender value at that time computed without regard to any policy loans made under the policy, any policy dividends, other than paid-up additions, payable under the policy or any interest payable on such dividends.

1972, c. 23, s. 698; 1973, c. 18, s. 26; 1978, c. 26, s. 181; 1980, c. 13, s. 96; 1981, c. 12, s. 11; 1984, c. 15, s. 222; 1986, c. 15, s. 151; 1986, c. 19, s. 173; 1991, c. 25, s. 158; 1993, c. 16, s. 312; 1994, c. 22, s. 304; 1996, c. 39, s. 273; 2001, c. 53, s. 205; 2003, c. 2, s. 260; 2004, c. 8, s. 172; 2019, c. 14, s. 283.

2006-03-01

966. In this Title and sections 92.11 to 92.19,

(a)  “disposition”, in relation to an interest in a life insurance policy, includes the surrender of the policy, a policy loan made after 31 March 1978 in respect of the policy, the dissolution of that interest by virtue of the maturity of the policy, the disposition of that interest by operation of law only, and a particular payment which is not an annuity payment, a policy loan or a policy dividend and which is paid by the insurer in respect of the policy where the latter is not a policy contemplated in the second paragraph of section 968 and is a life annuity contract, within the meaning of the regulations, entered into after 16 November 1978 and before 13 November 1981, buy does not include

i.  a payment under a policy as a disability benefit or as an accidental death benefit;

ii.  the assignment of all or any part of an interest in the policy for the purpose of securing a debt or a loan other than a policy loan;

iii.  the lapse of the policy in consequence of non-payment of the premiums, if the policy was reinstated within the 60 days after the end of the calendar year in which the lapse occurred;

iv.  an annuity payment;

v.  a payment made under the policy in consequence of the death of any person whose life was insured under the policy if the policy is not an annuity contract and if it was last acquired before 2 December 1982 or is an exempt policy;

vi.  any event or transaction by which an individual becomes entitled to receive, under the terms of an exempt policy, all of the proceeds, including or excluding policy dividends, payable under the policy in the form of an annuity contract or annuity payments, if, at the time of the event or transaction, the individual whose life is insured under the policy was totally and permanently disabled;

(a.1)  “insurer” or “life insurer” includes a person who is licensed or otherwise authorized under a law of Canada or a province to issue contracts that are annuity contracts;

(a.1.1)  “policy loan” means an amount advanced by an insurer to a policyholder in accordance with the terms and conditions of a life insurance policy;

(a.2)  “child” of a policyholder includes a child as defined in subparagraph d of the first paragraph of section 451;

(b)  “segregated fund trust”, “segregated fund”, “interest” and “amount payable” have the meaning assigned by section 835;

(b.1)  “person whose life was insured” includes an annuitant under a life annuity contract, within the meaning of the regulations, entered into before 17 November 1978;

(b.2)  (paragraph repealed);

(b.3)  “premium” under a life insurance policy includes a prepaid premium under the policy which is refundable only on termination or cancellation of the policy and interest paid after 31 December 1977 to a life insurer in respect of a policy loan in respect of such policy, except such interest deductible after 31 December 1980 in accordance with sections 160 to 163.1 but does not include, where the interest in the policy was last acquired after 1 December 1982, that portion of any amount paid after 31 May 1985 under the policy with respect to

i.  an accidental death benefit;

ii.  a disability benefit;

iii.  an additional risk as a result of insuring a substandard life;

iv.  an additional risk in respect of the conversion of a term insurance policy into another insurance policy after the end of the year;

v.  an additional risk under a settlement option;

vi.  an additional risk under a guaranteed insurability benefit; or

vii.  any other prescribed benefit that is ancillary to the policy;

(b.4)  “proceeds of the disposition” of an interest in a life insurance policy means the amount of the proceeds that the policyholder, beneficiary or assignee, as the case may be, is entitled to receive on a disposition of such interest and also means,

i.  in respect of a surrender or maturity of the policy, the amount by which the cash surrender value of that interest in the policy at the time of surrender or maturity, excluding that portion of the cash surrender value that is applicable to a policyholder’s interest in the segregated fund trust related to that policy as referred to in section 851.11, exceeds the aggregate of all amounts each of which is

(1)  an amount payable at that time by the policyholder in respect of a policy loan in respect of the policy,

(2)  a premium under the policy that is due but unpaid at that time, or

(3)  an amount applied, immediately after the time of the surrender, to pay a premium under the policy, as provided for under the terms and conditions of the policy;

ii.  in respect of a policy loan in respect of that policy made after 31 March 1978, the lesser of

(1)  the amount of the loan, other than the part thereof applied, immediately after the loan, to pay a premium under the policy, as provided for under the terms and conditions of the policy, and

(2)  the amount by which the cash surrender value of the policy immediately before the loan is made exceeds the aggregate of the amounts outstanding at that time in respect of policy loans in respect of the policy;

iii.  in respect of a particular payment referred to in paragraph a, the amount of the payment;

iv.  in respect of a deemed disposition described in paragraph b of section 967, the accumulating fund in respect of the interest, as determined in prescribed manner, immediately before the time of death in respect of a life insurance policy other than an annuity contract, last acquired after 1 December 1982, or immediately after the time of death in respect of an annuity contract;

(c)  “value”, at a particular time, of an interest in a life insurance policy means, when the interest includes an interest in the cash surrender value of the policy, the amount to which the holder of the interest would be entitled if the policy were surrendered at that time; such value is nil in other cases; and

(d)  “cash surrender value” at a particular time of a life insurance policy means its cash surrender value at that time computed without regard to any policy loans made under the policy, any policy dividends, other than paid-up additions, payable under the policy or any interest payable on such dividends.

1972, c. 23, s. 698; 1973, c. 18, s. 26; 1978, c. 26, s. 181; 1980, c. 13, s. 96; 1981, c. 12, s. 11; 1984, c. 15, s. 222; 1986, c. 15, s. 151; 1986, c. 19, s. 173; 1991, c. 25, s. 158; 1993, c. 16, s. 312; 1994, c. 22, s. 304; 1996, c. 39, s. 273; 2001, c. 53, s. 205; 2003, c. 2, s. 260; 2004, c. 8, s. 172.