Income Tax Regulations

307 (1) For the purposes of this Part and sections 12.2 and 148 of the Act, accumulating fund, at any particular time, means

• (a) in respect of a taxpayer’s interest in an annuity contract (other than a contract issued by a life insurer), the amount that is the greater of

  • (i) the amount, if any, by which the cash surrender value of the taxpayer’s interest at that time exceeds the amount payable, if any, in respect of a loan outstanding at that time made under the contract in respect of the interest, and

  • (ii) the amount, if any, by which

    • (A) the present value at that time of future payments to be made out of the contract in respect of the taxpayer’s interest

    exceeds

    • (B) the total of

      • (I) the present value at that time of future premiums to be paid under the contract in respect of the taxpayer’s interest, and

      • (II) the amount payable, if any, in respect of a loan outstanding at that time, made under the contract in respect of the taxpayer’s interest;

• (b) in respect of a taxpayer’s interest in a life insurance policy (other than an exemption test policy or an annuity contract to which paragraph (1)(a) applies), the product obtained when,

  • (i) where the policy is not a deposit administration fund policy and the particular time is immediately after the death of any person on whose life the life insurance policy is issued or effected, the aggregate of the maximum amounts that could be determined by the life insurer immediately before the death in respect of the policy under paragraph 1401(1)(c) and subparagraph 1401(1)(d)(i) if the mortality rates used were adjusted to reflect the assumption that the death would occur at the time and in the manner that it did occur, and

  • (ii) in any other case, the maximum amount that could be determined at that particular time by the life insurer under paragraph 1401(1)(a), computed as though there were only one deposit administration fund policy, or under paragraph 1401(1)(c), as the case may be, in respect of the policy

  is multiplied by

  • (iii) the taxpayer’s proportionate interest in the policy; and

• (c) in respect of an exemption test policy,

  • (i) if the particular time is during the exemption test policy’s pay period, the amount determined by the formula

    A × B/C

    where

    A

    is the amount that would be determined under subparagraph (ii) in respect of the exemption test policy

    • (A) if the exemption test policy’s pay period is determined by subparagraph (b)(i) or (ii) of the definition pay period in section 310, on the first policy anniversary that is on or after the day on which the individual whose life is insured would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, and

    • (B) in any other case, on the exemption test policy’s policy anniversary represented by the adjectival form of the number of years in its pay period,

    B

    is the number of years since the exemption test policy was issued, and

    C

    is the number of years in the exemption test policy’s pay period,

  • (ii) if the particular time is after the exemption test policy’s pay period and before its endowment date, the amount that is the present value at the particular time of the future benefit on death under the exemption test policy, and

  • (iii) if the particular time is on or after the exemption test policy’s endowment date and the relevant life insurance policy is issued after 2016, the amount that is the benefit on death under the exemption test policy at the particular time.

(2) For the purposes of subsection (1), when computing the accumulating fund in respect of

• (a) an interest described in paragraph (1)(a), the amounts determined under clauses (1)(a)(ii)(A) and (B) are to be computed using,

  • (i) where an interest rate for a period used by the issuer when the contract was issued in determining the terms of the contract was less than any rate so used for a subsequent period, the single rate that would, if it applied for each period, have produced the same terms, and

  • (ii) in any other case, the rates used by the issuer when the contract was issued in determining the terms of the contract;

• (b) an interest described in paragraph (1)(b) in respect of a life insurance policy issued before 2017 or an annuity contract, if an interest rate used for a period by a life insurer in computing the relevant amounts in paragraph 1403(1)(a) or (b) is determined under paragraph 1403(1)(c), (d) or (e), as the case may be, and that rate is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the policy is to be used;

• (c) an exemption test policy issued in respect of a life insurance policy issued before 2017,

  • (i) the rates of interest and mortality used and the age of the person whose life is insured shall be the same as those used in computing the amounts described in paragraph 1403(1)(a) or (b) in respect of the life insurance policy in respect of which the exemption test policy was issued except that

    • (A) where the life insurance policy is one to which paragraph 1403(1)(e) applies and the amount determined under subparagraph 1401(1)(c)(i) in respect of that policy is greater than the amount determined under subparagraph 1401(1)(c)(ii) in respect thereof, the rates of interest and mortality used may be those used in computing the cash surrender values of that policy, and

    • (B) where an interest rate for a period otherwise determined under this subparagraph in respect of that interest is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the life insurance policy shall be used, and

  • (ii) notwithstanding subparagraph (i),

    • (A) where the rates referred to in subparagraph (i) do not exist, the minimum guaranteed rates of interest used under the life insurance policy to determine cash surrender values and the rates of mortality under the Commissioners 1958 Standard Ordinary Mortality Table, as published in Volume X of the Transactions of the Society of Actuaries, relevant to the person whose life is insured under the life insurance policy shall be used, or

    • (B) where, in respect of the life insurance policy, the particular period over which the amount determined under clause (B) of the description of A in subparagraph 1401(1)(c)(ii) does not extend to the exemption test policy’s endowment date, the weighted arithmetic mean of the interest rates used to determine the amount is to be used for the period that is after the particular period and before that date,

  • (iii) notwithstanding subparagraphs (i) and (ii), no rate of interest used for the purpose of determining the accumulating fund in respect of an exemption test policy issued in respect of the life insurance policy is to be less than

    • (A) if the life insurance policy is issued after April 1985, 4% per annum, and

    • (B) if the life insurance policy is issued before May 1985, 3% per annum, and

  • (iv) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund; and

• (d) an exemption test policy issued in respect of a coverage under a life insurance policy issued after 2016,

  • (i) the rates of interest and mortality used and the age of the individual whose life is insured under the coverage are to be the same as those used in computing amounts under paragraph 1401(1)(c) in respect of the policy, and

  • (ii) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund.

(3) and (4) [Repealed, 2014, c. 39, s. 82]

(5) In this section, any amount determined by reference to section 1401 shall be determined

• (a) without regard to section 1402; and

• (b) as if each reference to “policy loan” in section 1401 were read as a reference to “policy loan, as defined in subsection 148(9) of the Act,”.

• (c) [Repealed, 2014, c. 39, s. 82]