Question

Dacey purchased a $300,000 UL policy with a level death benefit on December 1, 1982. The policy lapsed in 1983 and he reinstated it in 1984. The policy's current Account Value is $72,365 and its ACB is $73,892. Given this scenario how is the policy viewed by the CRA?

Answer 1

Dacey has a UL insurance policy with detail given on Account Value and ACB. The CRA assesses policy taxation based on ACB and Exempt Test Policy rules to determine potential taxable gains.

Step-by-step explanation:

Dacey purchased a $300,000 Universal Life (UL) insurance policy with a level death benefit on December 1, 1982, which later lapsed in 1983 and was reinstated in 1984. The policy has a current Account Value of $72,365 and an Adjusted Cost Base (ACB) of $73,892. The Canada Revenue Agency (CRA) would view this policy as a life insurance contract and will determine the taxation based on the policy's ACB and the Exempt Test Policy regulations, which dictate if the policy will accrue a taxable gain upon death or surrender.