I-3 - Taxation Act

Section 977.1 Disposition versions

2019-06-19

977.1. Where a taxpayer disposes of a part of the taxpayer’s interest in an annuity contract or a life insurance policy (other than such a contract) last acquired after 1 December 1982, the adjusted cost basis to the taxpayer, immediately before the disposition, of the part is equal to the amount determined by the formula

A × B/C.

In the formula in the first paragraph,

(a)  A is the adjusted cost basis to the taxpayer of the taxpayer’s interest immediately before the disposition;

(b)  B is the proceeds of the disposition; and

(c)  C is

i.  if the policy is a policy (other than an annuity contract) issued after 31 December 2016, the amount determined by the formula

D – E, and

ii.  in any other case, the accumulating fund with respect to the taxpayer’s interest, as determined in prescribed manner, immediately before the disposition.

In the formula in subparagraph c of the second paragraph,

(a)  D is the interest’s cash surrender value immediately before the disposition; and

(b)  E is the aggregate of all amounts each of which is an amount payable, immediately before the disposition, by the taxpayer in respect of a policy loan in respect of the policy.

The first paragraph does not apply, however, if the disposition is a policy loan granted after 31 March 1978 in respect of the policy or is a deemed disposition under paragraph a of section 967.

1984, c. 15, s. 228; 1986, c. 19, s. 181; 2001, c. 53, s. 211; 2019, c. 14, s. 291.

2006-03-01

977.1. For the purpose of computing a taxpayer’s income from the disposition of a part of his interest in an annuity contract or in a life insurance policy other than an annuity contract last acquired after 1 December 1982, the adjusted cost basis to him, immediately before the disposition of that part is obtained by multiplying the adjusted cost basis to him of his interest immediately before the disposition, by the ratio between the proceeds of the disposition of the part of his interest and the accumulating fund with respect to his interest, as determined in prescribed manner, immediately before the disposition.

The first paragraph does not apply, however, if the disposition is a policy loan granted after 31 March 1978 in respect of the policy or is a deemed disposition under paragraph a of section 967.

1984, c. 15, s. 228; 1986, c. 19, s. 181; 2001, c. 53, s. 211.