A number of amendments that would implement changes to the elimination test and other life insurance policy holder taxation rules have been published by the Canada’s Finance Department. Again, the proposals would amend the rules applying to the determination of the capital element of annuity payments for certain annuity contracts. The proposed amendments relate to the following matters:

  • Determining if a policy is an exempt policy;
  • Determining the types of transactions give rise to a nature of an interest in a policy;
  • Determining the tax treatment of a nature of an interest in a policy which would relate to both the synthesized cost basis of the interest and the proceeds of the disposition; and
  • Other changes to the Investment Income Tax as a result of some of the above amendments