,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#cji;,r#b
,subject3 ,9come ,tax ,act--,premiums on
  ,life ,9sur.e ,us$ z ,collat]al
,date3 ,febru>y #bh1 #aiie
,ref];e3 ,subp>agraph #bj7#a77e4#b7 7al
  sec;n #cjh (! ,regul,ns7

               ,applic,n
    
  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#cji;,r1 ,exp5ses (
,borr[+ ,m"oy--,life ,9sur.e ,premiums1
dat$ ,janu>y #aj1 #aigi4

                ,summ>y
    
  ,? bullet9 4cusses ! limit$ deduc;n t
is availa# 9 calculat+ 9come f a busi;s
or prop]ty = premiums paya# af #aihi "u
a life 9sur.e policy :5 ! policy      #a
             ,,it-#cji;,r#b          a#a
has be5 assign$ 6a re/rict$ f9ancial
9/itu;n z collat]al =a loan4 ,! am.t
eligi# = deduc;n 9 a "picul> ye> is
limit$ 6ei ! premiums paya# 0! taxpay]
"u ! policy =! ye>1 or ! net co/ ( pure
9sur.e "u ! policy =! ye>1 :i*"e am.t is
less4 ,fur!rmore1 only ! por;n (! less]
( ^! am.ts t c r1sonably 2 3sid]$
6relate 6! am.t [+ "u ! loan is
deducti#4

          ,4cus.n & ,9t]pret,n
            7p>agraphs #a-b7
    
#a4 ,p>agraph #bj7#a77e4#b7 p]mits a
  limit$ deduc;n 9 calculat+ 9come f a
  busi;s or prop]ty = premiums paya# af
  #aihi "u a life 9sur.e policy 7o!r ?an
  an annu;y 3tract74 ,! taxpay] seek+ !
  deduc;n m/ al 2 ! policyhold] =!
  premiums 6be 3sid]$ 6be 8paya# 0!
  taxpay] "u a life 9sur.e policy0 &
  deducti# "u p>agraph #bj7#a77e4#b74 ,!
  provi.ns ( p>agraph #bj7#a77e4#b7   #b
             ,,it-#cji;,r#b          b#a
  w apply 6p]mit a deduc;n = premiums
  paya# "u a life 9sur.e policy if all !
  3di;ns 9 7a7 to 7c7 2l >e satisfi$3
  7a7 ,an 9t]e/ 9 ! life 9sur.e policy
    is assign$ 6a re/rict$ f9ancial
    9/itu;n 7,,rfi7 9 ! c\rse (a borr[+
    f ! 9/itu;n4 ,an ,,rfi is def9$ 9
    subsec;n #bdh7#a7 & 9cludes f9ancial
    9/itu;ns s* z banks1 tru/ -panies1
    cr$it unions & 9sur.e -panies4
  7b7 ,! 9t]e/ paya# on ! borr[+ is or
    wd1 b = subsec;ns #ah7#b7 & 7#c.a7 &
    sec;ns #ba & #bh1 2 deducti# 9
    calculat+ ! taxpay]'s 9come =! ye>4
  7c7 ,! assign;t ref]r$ 6in 7a7 is
    requir$ 0! ,,rfi z collat]al =!
    borr[+4
#b4 ,provid$ ! 3di;ns 9 #a abv >e
  satisfi$1 ! am.t eligi# = deduc;n "u
  p>agraph #bj7#a77e4#b7 is ! por;n (!
  less] (3
  7a7 ! premiums paya# 0! taxpay] "u !
    life 9sur.e policy =! ye>1 &
                                      #c
             ,,it-#cji;,r#b          c#a
  7b7 ! net co/ ( pure 9sur.e "u !
    policy =! ye> 7see #d 2l7
  
  t c r1sonably 2 3sid]$ 6relate 6! am.t
  [+ f "t 6"t dur+ ! ye> "u ! loan = : !
  9sur.e policy has be5 assign$ z
  collat]al4

  ,= example1 if ! life 9sur.e cov]age
  "u an assign$ policy is 4#ejj1jjj1 &!
  am.t [+ "u ! loan "?\t ! tax,n ye> is
  4#bjj1jjj1 ! am.t deducti# "u p>agraph
  #bj7#a77e4#b7 is limit$ 6#dj@3p (!
  less] (! premiums paya# &! net co/ (
  pure 9sur.e "u ! policy =! ye>4 ,if !
  taxpay]'s tax,n ye> 5d does n
  correspond 6! policy ye>1 ! premiums
  paya# "u ! policy %d 2 prorat$ on a
  r1sona# basis 6! tax,n ye>4 ,simil>ly1
  ! net co/ ( pure 9sur.e1 : is det]m9$
  0! 9sur] on a cal5d> ye> basis1 %d 2
  prorat$ on a r1sona# basis 6! tax,n
  ye>4
                                      #d
       ,l9e ( cr$it 7p>agraph #c7    d#a
    
#c4 ,an unus$ l9e ( cr$it1 ev5 if x is
  subject 6a /&by *>ge or -mit;t fee1 is
  n an am.t [+ 9 det]m9+ ! por;n t 8c
  r1sonably 2 3sid]$ 6relate 6! am.t [+
  f "t 6"t dur+ ! ye>0 "u ! loan4

         ,net co/ ( pure 9sur.e
             7p>agraph #d7
    
#d4 ,! net co/ ( pure 9sur.e "u a life
  9sur.e policy is 6be det]m9$ 9 a3ord.e
  ) sec;n #cjh (! ,9come ,tax ,regul,ns4
  ,! net co/ ( pure 9sur.e1 : may 2
  obta9$ f ! 9sur.e -pany1 is det]m9$
  0ref]r+ 6/&>d mortal;y assump;ns &
  approximates ! co/ (! pure 9sur.e
  cov]age "u ! policy =! ye>4 ,z a
  result1 :5 ! policy1 : has be5 assign$
  z collat]al =a loan1 has a sav+s
  -pon5t or "s =m ( prefund+1 ! maximum
  deduc;n "u p>agraph #bj7#a77e4#b7 wd
  g5],y 2 limit$ 0! 8net co/ ( pure
  9sur.e0 limit,n 9 #b7b7 abv4        #e
       ,collat]al 9 excess ( loan    e#a
          bal.e 7p>agraph #e7
    
#e4 ,x may 2 t an ,,rfi1 9 a3ord.e )
  9du/ry practice1 requires t o!r assets
  2 pl$g$ z collat]al =a loan s* t !
  total value (! collat]al exce$s ! loan
  bal.e4 ,9 ^! cases1 a deduc;n "u
  p>agraph #bj7#a77e4#b7 w usu,y n 2
  d5i$ un.s x is cle> t !
--------------------------------------#b
  l5d] has made ! life 9sur.e require;t
  simply 6a3ommodate ! taxpay]4 ,"!=e1 a
  deduc;n =! full am.t (! premiums is
  g5],y availa#1 subject 6! require;ts 9
  #a 6#c abv1 provid$ ! 9sur.e cov]age
  does n exce$ ! maximum am.t (! loan
  \t/&+ dur+ ! ye>4

           ,assign;t ( policy
             7p>agraph #f7
    
#f4 ,= purposes ( #a7a7 abv1 x is n nec
  t a policy 2 tak5 \ at ! "t ( borr[+4
  ,! assign;t ( an exi/+ policy is    #f
             ,,it-#cji;,r#b          a#b
  a3epta#4 ,h["e1 s* an assign;t m/
  satisfy a bona fide require;t (! ,,rfi
  & n 2 an a3ommod,n 6provide ! borr[]
  a3ess 6a deduc;n ( o!rwise non-
  deducti# premiums4

           ,duplicate 9sur.e
             7p>agraph #g7
    
#g4 ,9 "s situ,ns1 a l5d] may require t
  ! lives ( m ?an "o p]son 2 9sur$ 9
  respect (a "picul> borr[+4 ,9 s*
  situ,ns1 ! deductibil;y (! premiums
  paya# 0! borr[] "u any "picul> policy
  is det]m9$ 9dep5d5tly (! o!r policies1
  z if ea* policy 7 ! only life 9sur.e
  policy assign$ z collat]al =! loan4

         ,example 7p>agraph #h7
    
#h4 ,corpor,n ;,a 7,decemb] #ca ye>-5d7
  borr[s 4#djj1jjj f xs bank on ,janu>y
  #a1 #aiid4 ,! bank 7an ,,rfi7 requir$
  ! foll[+ collat]al3                 #g
             ,,it-#cji;,r#b          b#b
  --assign;t ( exi/+ life 9sur.e
    policies on two s5ior (fic]s (!
    corpor,n 7! policies h 4#ejj1jjj &
    4#cej1jjj cov]age72 &
  --pl$ge ( fix$ assets 7fair m>ket
    value ( assets3 4#ajj1jjj74
  
  ,on ,june #cj1 #aiid1 ! corpor,n
  repays 4#ajj1jjj ( pr9cipal on ! loan4

  ,! premiums on ! life 9sur.e policies
  >e 4#a1jjj & 4#hjj a ye>4 ,"! is a
  sav+s -pon5t 9 ea* policy1 & x has be5
  det]m9$ t ! co/ ( pure 9sur.e =! ye>
  is 4#gej & 4#fjj respectively = ^!
  policies4 ,assum+ ! 3di;ns 9 #a7a7 to
  7c7 abv >e satisfi$1 ! am.t deducti#
  "u p>agraph #bj7#a77e4#b7 = #aiid =
  ea* policy is det]m9$ z foll[s3




                                      #h
             ,,it-#cji;,r#b          c#b
 """""""""""""""""""""" ,policy  ,policy
 """""""""""""""""""""" ;,i """" ,,ii
,less] (3
--premiums paya# """""" 4#a1jjj "" 4#hjj
--net co/ ( pure 9sur.e   4#gej "" 4#fjj
7,a7 ,less] am.t """""""" 4#gej "" 4#fjj

  ,por;n ( am.t 7,a7 t c
    r1sonably 2 3sid]$
    6relate 6! am.t [+3
,f ,janu>y 6,june
4#gej "ts #f divid$ 0#ab
  "ts 4#djj1jjj divid$
  04#ejj1jjj """""""""""" 4#cjj
4#fjj "ts #f divid$ 0#ab """"""""" 4#cjj

,f ,july 6,decemb]
4#gej "ts #f divid$ 0#ab
  "ts 4#cjj1jjj divid$
  04#ejj1jjj """""""""""" 4#bbe
4#fjj "ts #f divid$ 0#ab
  "ts 4#cjj1jjj divid$
  04#cej1jjj """"""""""""""""""""" 4#beg
                                      #i
             ,,it-#cji;,r#b          d#b
,am.t deducti# "u
  p>agraph #bj7#a77e4#b7
  =! ye>3 """"""""""""""" 4#ebe "" 4#eeg
,non deducti# por;n (
  premiums3 """"""""""""" 4#dge "" 4#bdc

  ,if y h any -;ts reg>d+ ! matt]s
4cuss$ 9 ? bullet91 pl1se s5d !m to3

  ,director1 ,te*nical ,public,ns
    ,divi.n
  ,policy & ,legisl,n ,bran*
  ,rev5ue ,canada
  #hge ,h]on ,road
  ,ottawa ,,on ,k#a;,a #j;,l#h
  







                                     #aj
         ,explan,n ( ,*anges =        #c
       ,9t]pret,n ,bullet9 ,,it-
      #cji;,r#b ,premiums on ,life
       ,9sur.e ,us$ z ,collat]al
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns t we h made z
a result ( *anges 6! law1 z well z
*anges reflect+ new or revis$ de"p;tal
9t]pret,ns4

                ,ov]view
    
  ,? bullet9 d1ls )! limit$ deduc;n t is
availa# 9 calculat+ 9come f a busi;s or
prop]ty = premiums paya# af #aihi "u a
life 9sur.e policy1 :5 ! policy has be5
assign$ 6a re/rict$ f9ancial 9/itu;n z
collat]al =a loan4
  ,we h "utak5 ? revi.n 69corporate !
am5d;ts 6! ,9come ,tax ,act 5act$
0,s4,c4 #aiid1 c4 #g1 ,sch4 ,,ii     #aa
             ,,it-#cji;,r#b          a#c
7#aiia1 c4#di--=m]ly ,bill ;,c-#ah7 6d1l
)! 9troduc;n ( p>agraph #bj7#a77e4#b7 =
premiums paya# af #aihi4

       ,legislative & o!r *anges
    
  ,we h revis$ p>agraphs #a 6#d 6reflect
! ,bill ;,c-#ah 9troduc;n ( p>agraph
#bj7#a77e4#b74 ,!y expla9 ! 3di;ns t m/
2 met = life 9sur.e premiums 6be
deducti# "u t p>agraph4 ,=m] p>agraphs
#a 6#d expla9$ ! limit$ circum/.es "u :
life 9sur.e premiums cd 2 claim$1 2f !
9troduc;n ( p>agraph #bj7#a77e4#b71 z a
co/ ( borr[+ m"oy "u subp>agraph
#bj7#a77e77;ii74 ,h["e1 ! deci.n 9 ,h]
,maje/y ! ,que5 v4 ,anto9e ,gu]t91 #aihh
,,dtc #fabf1 ,7#aihh7' #a ,c4,t4,c4 #cfj
ov]rul$ ! posi;n 3ta9$ 9 =m] p>agraphs
#a 6#d4 ,p>agraph #bj7#a77e4#b7 0 5act$
6c.t] ? deci.n & 6g5],y 3t9ue1 ) "s
modific,n1 ! adm9i/rative practice z set
\ 9 =m] p>agraphs #a 6#d4
                                     #ab
             ,,it-#cji;,r#b          b#c
  ,=m] p>agraph #f provid$ t x 0 n nec
=! borr[] 6be ! policyhold] 6deduct !
life 9sur.e premiums z a co/ ( borr[+
m"oy "u subp>agraph #bj7#a77e77;ii7 z
l;g z ! borr[] bore ! premium co/4 ,x al
d1lt ) taxa# b5efits t may h be5 3f]r$
on ! policyhold] 9 s* circum/.es4 ,"u
p>agraph #bj7#a77e4#b71 ! life 9sur.e
premiums m/ 2 paya# 0! taxpay] "u ! life
9sur.e policy4 ,s9ce =m] p>agraph #f is
n relevant = life 9sur.e premiums
deducti# "u p>agraph #bj7#a77e4#b71 we h
delet$ x4
  ,we h revis$ new p>agraph #e 7=m]
p>agraph #g7 6expla9 ! deductibil;y (
life 9sur.e premiums 9 situ,ns ": ! l5d]
requires collat]al 9 excess (! loan
bal.e4
  ,=m] p>agraph #h provid$ t 9 c]ta9
situ,ns1 ! unus$ por;n (a l9e ( cr$it cd
2 3sid]$ =! purpose ( det]m9+ ! deducti#
por;n (! 9sur.e premium4 ,h["e1 "u
p>agraph #bj7#a77e4#b7 only ! por;n (!
life 9sur.e premium t may            #ac
             ,,it-#cji;,r#b          c#c
r1sonably 2 3sid]$ 6relate 6! am.t [+
may 2 deducti#4 ,z m5;n$ 9 new p>agraph
#c1 any unus$ por;n (a l9e ( cr$it is n
an am.t [+ & _c 2 tak5 963sid],n 9 !
det]m9,n (a deduc;n "u p>agraph
#bj7#a77e4#b74 ,"!=e1 we h delet$ =m]
p>agraph #h4
  ,! posi;n 9 new p>agraph #g 7=m]
p>agraph #i7 0 revis$ 6elim9ate ! 3di;n
t "! 2 a valid busi;s r1son =! assign;t
( duplicate life 9sur.e policies4 ,?
3di;n is n requir$ "u p>agraph
#bj7#a77e4#b74 ,fur!rmore1 "u t
p>agraph1 ! deductibil;y (! premiums =a
life 9sur.e policy assign$ z collat]al
=a loan is det]m9$ 9dep5d5tly (!
assign;t ( o!r life 9sur.e policies z
a4i;nal collat]al =! loan4 ,acly1 we h
*ang$ ! posi;n 9 =m] p>agraph #i t
3sid]$ ! face am.t ( only "o policy &!
a7regate ( all ! policy premiums 9
det]m9+ ! deducti# am.t4
  ,we h a4$ new p>agraph #h 6provide a
detail$ example on calculat+ !       #ad
             ,,it-#cji;,r#b          d#c
am.t ( life 9sur.e premiums t >e
deducti# "u p>agraph #bj7#a77e4#b71 &
6illu/rate mo/ (! -;ts made 9 ! bullet94
  ,"?\t ! bullet91 we h made m9or *anges
= cl>ific,n or r1dabil;y purposes4


















                                     #ae