I-3 - Taxation Act

Section 890.3 Disposition versions

2006-03-01

890.3. For the purposes of this Part, where by virtue of a plan or arrangement an employer is obliged to provide benefits that are to be received or enjoyed by any person on, after or in contemplation of any substantial change in the services rendered by a taxpayer, the retirement of a taxpayer or the loss of an office or employment of a taxpayer, and where the employer, former employer or a person or partnership with whom the employer or former employer does not deal at arm’s length acquires an interest in a life insurance policy that may reasonably be considered to be acquired to fund, in whole or in part, those benefits, the rules set out in the second paragraph apply in respect of the plan or arrangement if it is not otherwise a retirement compensation arrangement and is not excluded from the definition of the expression “retirement compensation arrangement” by any of subparagraphs a to l and n of the second paragraph of section 899.1.

The rules referred to in the first paragraph are the following:

(a)  the person or partnership referred to in the first paragraph who acquired the interest is deemed to be the custodian of a retirement compensation arrangement;

(b)  the interest is deemed to be subject property of the retirement compensation arrangement;

(c)  an amount equal to twice the amount of any premium paid in respect of the interest or any repayment of a policy loan thereunder is deemed to be a contribution under the retirement compensation arrangement; and

(d)  any payment received in respect of the interest, including a policy loan, and any amount received as a refund of refundable tax under subsection 2 of section 207.7 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) is deemed to be an amount received out of or under the retirement compensation arrangement by the recipient and not to be a payment of any other amount.

1989, c. 77, s. 95; 1991, c. 25, s. 176; 1997, c. 3, s. 71; 2001, c. 53, s. 180.