2021-0884281C6 2021 CLHIA Roundtable - Q3 - Folios

Principal Issues: This question and answer deals with the current status of the Income Tax Folio Project and in particular, the Income Tax Folio that will replace IT-87R2, Policyholder's Income from Life Insurance Policies

Position: Update provided

Reasons: NA

Author: Campbell, Alison
Section: 148

2021 CLHIA Roundtable

Question 3 – Tax Folio on Life Insurance Dispositions

Background:

At the CALU 2014 CRA Roundtable (Question 2) CALU noted that the Income Tax Rulings Directorate (ITRD) had started to update and improve the technical content contained in Interpretation Bulletins through the creation of a new technical tax publication called Income Tax Folios.

Interpretation Bulletin IT-87R2 sets out the CRA’s views with respect to Policyholders’ Income from Life Insurance Policies. This IT is currently archived and was last updated effective February 28, 1996.  It is our understanding that, in early 2016, the tax community provided the CRA a draft folio for the CRA to review for purposes of updating the information contained in IT-87R2.

Question:

Can the CRA provide an update on the Income Tax Folio project and, in particular, comment on the status of an Income Tax Folio that would replace archived IT-87R2 (Policyholder Income from Life Insurance Policies)?

CRA Response

Income Tax Folios provide important technical and interpretive information on specific income tax topics and the related provisions of the Income Tax Act. To date, the CRA has published 44 Income Tax Folios on a variety of topics and has published numerous updates to these Folios. The Folios are an important part of ITRD’s workload and we continue to work on publishing new ones as well as updating Folios that are already published.

The process of writing and updating Folios is very resource-intensive. It requires extensive research and detailed technical analysis of complex issues, along with consultations within the CRA and with other government departments before each folio is published.

As resources permit, ITRD continues to work on the Folio that will replace IT-87R2.  The draft provided by the tax community in early 2016 does not reflect any of the legislative amendments to section 148 of the Income Tax Act, nor the amendments to related sections of the Income Tax Regulations, since 2016. The tax community’s draft will be used as an aid in development of the new Folio.  We are committed to publishing a Folio that will provide general tax information to policyholders of life insurance policies. Any discussion of tax planning arrangements involving the use of life insurance policies will be outside the scope of the Folio.

Alison M. Campbell
|May 19, 2021
2021-088428

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