Income Tax Regulations

309.1 For the purpose of subparagraph 309(1)(e)(i), in computing a life insurer’s income for a taxation year from its participating life insurance business carried on in Canada,

• (a) there shall be included the amount determined by the formula

  A × B/C

  where

  A

  is the insurer’s gross Canadian life investment income (in this section as defined in subsection 2400(1)) for the year,

  B

  is the total of

  • (i) the insurer’s mean maximum tax actuarial reserve (in this section as defined in subsection 2400(1)) for the year in respect of participating life insurance policies in Canada, and

  • (ii) 1/2 of the total of

    • (A) all amounts on deposit with the insurer as at the end of the year in respect of policies described in subparagraph (i), and

    • (B) all amounts on deposit with the insurer as at the end of the immediately preceding taxation year in respect of policies described in subparagraph (i), and

  C

  the total of all amounts, each of which is

  • (i) the insurer’s mean maximum tax actuarial reserve for the year in respect of a class of life insurance policies in Canada, or

  • (ii) 1/2 of the total of

    • (A) all amounts on deposit with the insurer as at the end of the year in respect of a class of policies described in subparagraph (i), and

    • (B) all amounts on deposit with the insurer as at the end of the immediately preceding taxation year in respect of a class of policies described in subparagraph (i);

• (b) there shall be included

  • (i) the insurer’s maximum tax actuarial reserve for the immediately preceding taxation year in respect of participating life insurance policies in Canada, and

  • (ii) the maximum amount deductible by the insurer under subparagraph 138(3)(a)(ii) of the Act in computing its income for the immediately preceding taxation year in respect of participating life insurance policies in Canada;

• (c) there shall not be included any amount in respect of the insurer’s participating life insurance policies in Canada that was deducted under subparagraph 138(3)(a)(i) or (ii) of the Act in computing its income for the immediately preceding taxation year;

• (d) subject to paragraph (a),

  • (i) there shall not be included any amount

    • (A) as a reserve that was deducted under paragraph 20(1)(l) of the Act in computing the insurer’s income for the immediately preceding taxation year, or

    • (B) that was included in determining the insurer’s gross Canadian life investment income for the year, and

  • (ii) no deduction shall be made in respect of any amount

    • (A) taken into account in determining the insurer’s gross Canadian life investment income for the year, or

    • (B) deductible under paragraph 20(1)(l) of the Act in computing the insurer’s income for the year;

• (e) there shall be deducted

  • (i) the insurer’s maximum tax actuarial reserve for the year in respect of participating life insurance policies in Canada, and

  • (ii) the maximum amount deductible by the insurer under subparagraph 138(3)(a)(ii) of the Act in computing its income for the year in respect of participating life insurance policies in Canada;

• (f) no deduction shall be made in respect of any amount deductible under subparagraph 138(3)(a)(iii) of the Act in computing the insurer’s income for the year;

• (g) except as otherwise provided in paragraph (e), no deduction shall be made in respect of a reserve deductible under subparagraph 138(3)(a)(i) or (ii) of the Act in computing the insurer’s income for the year; and

• (h) except as otherwise provided in this section, the provisions of the Act relating to the computation of income from a source shall apply.