I-3 - Taxation Act

Section 726.6.2 Disposition versions

2017-12-07

726.6.2. For the purposes of the definition of “small business corporation” in section 1, of subparagraph a.2 of the first paragraph of section 451, of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm or fishing corporation” in the first paragraph of section 726.6.1, and of the second paragraph of section 726.6.1, the following rules apply:

(a)  where a person, in this section referred to as the “insured”, whose life was insured under an insurance policy owned by a particular corporation, owned particular shares of the capital stock of the particular corporation, any corporation connected with the particular corporation or with which the particular corporation is connected or any other corporation connected with any such corporation or with which any such corporation is connected, within the meaning of the regulations,

i.  the fair market value of the life insurance policy is deemed, at any time before the death of the insured, to be its cash surrender value, within the meaning of paragraph d of section 966, at that time, and

ii.  the total fair market value of assets described in the second paragraph—other than assets described in subparagraphs i to iii of paragraph c of the definition of “qualified small business corporation share” in the first paragraph of section 726.6.1, subparagraphs i to iii of paragraph a of the definition of “share of the capital stock of a family farm or fishing corporation” in that first paragraph, or paragraphs a to c of the definition of “small business corporation” in section 1, as the case may be—of any of those corporations not in excess of the fair market value of the assets immediately after the death of the insured is deemed, until the later of the redemption, acquisition or cancellation referred to in subparagraph b of the second paragraph and the day that is 60 days after the payment of the proceeds under the policy, not to exceed the cash surrender value, within the meaning of paragraph d of section 966, of the life insurance policy immediately before the death of the insured; and

(b)  the fair market value of an asset of a particular corporation that is a share of the capital stock or indebtedness of another corporation with which the particular corporation is connected is deemed to be nil.

The assets referred to in subparagraph ii of subparagraph a of the first paragraph are

(a)  the proceeds, the right to receive the proceeds or attributable to the proceeds of the life insurance policy of which the particular corporation was a beneficiary, and

(b)  used, directly or indirectly, within the 24-month period commencing at the time of the death of the insured or, where written application therefor is made by the particular corporation within that period, within such longer period as the Minister considers reasonable in the circumstances, to redeem, acquire or cancel the particular shares owned by the insured immediately before the death of the insured.

For the purposes of subparagraph b of the first paragraph, a particular corporation is connected with another corporation only where

(a)  the particular corporation is connected, within the meaning of subparagraph a of the second paragraph of section 726.6.1, with the other corporation; and

(b)  the other corporation is not connected, within the meaning of the regulations if the latter were read without reference to subparagraph b of the first paragraph of section 739, with the particular corporation.

Subparagraph b of the first paragraph applies only in determining whether a share of the capital stock of another corporation with which the particular corporation referred to in that subparagraph b is connected is a qualified small business corporation share or a share of the capital stock of a family farm or fishing corporation and in determining whether the other corporation is a small business corporation.

1993, c. 16, s. 266; 1995, c. 49, s. 166; 1997, c. 3, s. 71; 2012, c. 8, s. 68; 2017, c. 29, s. 98.

2012-05-09

726.6.2. For the purposes of the definition of “small business corporation” in section 1, of subparagraph a of the first paragraph of section 451, of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph of section 726.6.1, and of the second paragraph of section 726.6.1, the following rules apply:

(a)  where a person, in this section referred to as the “insured”, whose life was insured under an insurance policy owned by a particular corporation, owned particular shares of the capital stock of the particular corporation, any corporation connected with the particular corporation or with which the particular corporation is connected or any other corporation connected with any such corporation or with which any such corporation is connected, within the meaning of the regulations,

i.  the fair market value of the life insurance policy is deemed, at any time before the death of the insured, to be its cash surrender value, within the meaning of paragraph d of section 966, at that time, and

ii.  the total fair market value of assets described in the second paragraph, other than assets described in subparagraphs i to iii of paragraph c of the definition of “qualified small business corporation share” in the first paragraph of section 726.6.1, subparagraphs i to iii of paragraph b of the definition of “share of the capital stock of a family farm corporation” in that first paragraph, or paragraphs a to d of the definition of “small business corporation” in section 1, as the case may be, of any of those corporations not in excess of the fair market value of the assets immediately after the death of the insured is deemed, until the later of the redemption, acquisition or cancellation referred to in subparagraph b of the second paragraph and the date that is 60 days after the payment of the proceeds under the policy, not to exceed the cash surrender value, within the meaning of paragraph d of section 966, of the life insurance policy immediately before the death of the insured; and

(b)  the fair market value of an asset of a particular corporation that is a share of the capital stock or indebtedness of another corporation with which the particular corporation is connected is deemed to be nil.

The assets referred to in subparagraph ii of subparagraph a of the first paragraph are

(a)  the proceeds, the right to receive the proceeds or attributable to the proceeds of the life insurance policy of which the particular corporation was a beneficiary, and

(b)  used, directly or indirectly, within the 24-month period commencing at the time of the death of the insured or, where written application therefor is made by the particular corporation within that period, within such longer period as the Minister considers reasonable in the circumstances, to redeem, acquire or cancel the particular shares owned by the insured immediately before the death of the insured.

For the purposes of subparagraph b of the first paragraph, a particular corporation is connected with another corporation only where

(a)  the particular corporation is connected, within the meaning of subparagraph a of the second paragraph of section 726.6.1, with the other corporation; and

(b)  the other corporation is not connected, within the meaning of the regulations if the latter were read without reference to subparagraph b of the first paragraph of section 739, with the particular corporation.

Subparagraph b of the first paragraph applies only in determining whether a share of the capital stock of another corporation with which the particular corporation is connected is a qualified small business corporation share or a share of the capital stock of a family farm corporation and in determining whether the other corporation is a small business corporation.

1993, c. 16, s. 266; 1995, c. 49, s. 166; 1997, c. 3, s. 71; 2012, c. 8, s. 68.

2006-03-01

726.6.2. For the purposes of the definition of “small business corporation” in section 1, of subparagraph a of the first paragraph of section 451, of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph of section 726.6.1, and of the second paragraph of section 726.6.1, the following rules apply:

(a)  where a person, in this section referred to as the “insured”, whose life was insured under an insurance policy owned by a particular corporation, owned particular shares of the capital stock of the particular corporation, any corporation connected with the particular corporation or with which the particular corporation is connected or any other corporation connected with any such corporation or with which any such corporation is connected, within the meaning of the regulations,

i.  the fair market value of the life insurance policy is deemed, at any time before the death of the insured, to be its cash surrender value, within the meaning of paragraph d of section 966, at that time, and

ii.  the total fair market value of assets described in the second paragraph, other than assets described in subparagraphs i to iii of paragraph c of the definition of “qualified small business corporation share” in the first paragraph of section 726.6.1, subparagraphs i to iii of paragraph b of the definition of “share of the capital stock of a family farm corporation” in that first paragraph, or paragraphs a to d of the definition of “small business corporation” in section 1, as the case may be, of any of those corporations not in excess of the fair market value of the assets immediately after the death of the insured is deemed, until the later of the redemption, acquisition or cancellation referred to in subparagraph b of the second paragraph and the date that is 60 days after the payment of the proceeds under the policy, not to exceed the cash surrender value, within the meaning of paragraph d of section 966, of the life insurance policy immediately before the death of the insured; and

(b)  the fair market value of an asset of a particular corporation that is a share of the capital stock or indebtedness of another corporation with which the particular corporation is connected is deemed to be nil.

The assets referred to in subparagraph ii of subparagraph a of the first paragraph are

(a)  the proceeds, the right to receive the proceeds or attributable to the proceeds of the life insurance policy of which the particular corporation was a beneficiary, and

(b)  used, directly or indirectly, within the 24-month period commencing at the time of the death of the insured or, where written application therefor is made by the particular corporation within that period, within such longer period as the Minister considers reasonable in the circumstances, to redeem, acquire or cancel the particular shares owned by the insured immediately before the death of the insured.

For the purposes of subparagraph b of the first paragraph, a particular corporation is connected with another corporation only where

(a)  the particular corporation is connected, within the meaning of subparagraph a of the second paragraph of section 726.6.1, with the other corporation; and

(b)  the other corporation is not connected, within the meaning of the regulations if the latter were read without reference to paragraph b of section 739, with the particular corporation.

Subparagraph b of the first paragraph applies only in determining whether a share of the capital stock of another corporation with which the particular corporation is connected is a qualified small business corporation share or a share of the capital stock of a family farm corporation and in determining whether the other corporation is a small business corporation.

1993, c. 16, s. 266; 1995, c. 49, s. 166; 1997, c. 3, s. 71.