INDEX A grandfathered policies, 11, 12, 13 21-year deemed disposition rule, keyperson insurance strategy and, 301 302 205, 207, 208 Crummey trust and, 325 pro-rating, 11 Accounting for life insurance, reduction by NCPI, 10 11, 75 76 200 202 Adjusted purchase price, 412, 427, Accounting standards, 65 66 429 Accrual reporting Advanced death benefit, 60 62 annuities, 401 403 Aggressive tax planning, 135 136 Accrual taxation, 7 8, 401 403 Annuitant annuities death of, 422 424, 435, 436 introduction of, 401 403 defined, 394, 397 annuity contracts Annuities, see also Annuity contracts, post-1989 contracts, 410 424 Charitable annuities, Deferred pre-1990 contracts, 424 429 annuities, Insured annuities, deferred annuities, 433 434 Segregated funds, Structured settlements contracts last acquired after December 31, 1989, 436 accrual taxation rules, 401 403 contracts last acquired prior to exempted, 402 April 1, 1977, 433 435 deemed disposition rules, 453 contracts last acquired after deferred, 431 March 31, 1977 and before January 1, 1990, 435 436 defined, 394, 397 general, 1, 397 Accumulating fund, 7 11, 82 83, 433 grandfathered, 402 Adjusted cost base, 3, 4, 5, 6, 7, 8, 10 15 immediate, 409 annuity contracts, 484 income calculation of, 75 81 requirement to report, 401 examples of, 78 81 life annuities, 397, 399, 409 defined, 3, 4, 75 77, 418 non-prescribed, 448, 453, 457 formula, 76 77 prescribed, 403 404, 434 436 669
Annuities (cont d) taxation of qualifying as structured settlement, post-1989 contracts 472 accrual taxation of, 410 411 reporting requirements, 402, 432 dispositions, taxation of segregated fund, 398, 404 408 adjusted cost basis, 420 422 taxation of overview, 417 accrual taxation, 401 402 proceeds of disposition, early, 398 400 418 419 Carter Commission, 400 401 what constitutes, 411 413, tax reform and, 400 401 418 term annuities, 397 overview, 410 payments, taxation of, 411 Annuitization, 3, 7, 73, 434, 435, 436 prescribed annuity contracts, as disposition, 11 413 417 Annuity contracts, see also taxation on death Annuities, Charitable annuities, contract transferred to Deferred annuities, Insured beneficiary, 423 424 annuities, Segregated funds general, 422 adjusted purchase price, 412, 427, 429 lump sum paid to beneficiary, 423 death, taxation on, 422 termination of contract on contract transferred to beneficiary, death, 422 423 423 pre-1990 contracts general, 422 contracts acquired after lump sum paid to beneficiary, December 1, 1982 and before 423 January 1, 1990 termination of contract, 422 accrual taxation, 428 dispositions, 415, 417 422, 423 adjusted cost basis, 429 general, 409, 431 dispositions, taxation of, 429 income averaging annuity contracts payments, taxation of, 429 (IAACs), 400 401 taxation on death, 429 last survivor, 403, 415 contracts acquired before payments, 409, 410 December 2, 1982 prescribed annuity contracts (PACs), accrual taxation, 425 426 403 404, 413 adjusted cost basis, 426 defined, 402, 413 disposition, taxation of, 427 payments, 411 payments, taxation of, 427 proceeds of disposition, 418 419 pre-1982 unallocated income, surrenders, 418, 434 426 670
Annuity contracts (cont d) spousal, 94 taxation on death, 427 trusts, 296 297 overview, 424 third party life contracts, 421, 424 B types, 397 Beneficiary Assignment 21-year deemed disposition rule, 301 302 absolute Crummey trust, 325 general, 88 annuity contracts general rule, 89 contract transferred to, 423 424 gifts, non-arm s length transfers, 89 death of owner, lump sum paid, 423 tax-free rollovers, 90 95 capital beneficiaries, 301 generation transfers and charity as, 377, 382, 386, 387 intergeneration transfers, 90 93 children, 164, 168 inter vivos transfer to spouse/common-law partner, common-law partner, 169 93 94 annuity contracts, 414 417 transfer out of a personal trust, corporation 95 business insurance trust, 308 309 transfer to spouse/common-law deferred annuities, 397 partner at death, 94 95 defined, 165, 168 business loan protection, 203 204 grandchildren, 164, 168 deductibility, 203 204 irrevocable disposition, as, 203 204 creditor protection, 167 170 charity, to, 388 intergenerational transfers, collateral life insurance deduction, 171 173 461 notice of transfer, 172 exempt life insurance policy, minor, 289, 296, 303 170 171 partnership property, 346 348 leveraged insured annuities personally-owned insured annuities, collateral life insurance deduction, 447 461 private corporation partnerships, 369 business insurance trust, 308 309 structured settlements, 473 credit to capital dividend account, under Quebec Civil Code, 181 176 Attribution rules Quebec, 162 corporate, 107 same-sex partners, 168 intergenerational transfers, 172 segregated funds, 481 482 671
Beneficiary (cont d) effective date, 21 shareholder designated, on exempt test, 22 23 corporate-owned life insurance, 189 grandfathering, 22, 28 29 spouse, 163 Bill C-139, see Notice of Ways and term-to-100 life insurance policy, Means Motion and Bill C-139 446 trusts, 287 Borrowing, see also Business loan protection, Keyperson insurance withdrawal rights protection Crummey Trust, 325 general, 125 Benefits, see also Death benefit leveraged insured annuity, see employees Insured annuities, leveraged insured group life insurance premiums, annuities 189 leveraged life insurance programs, premiums paid by corporation, see Leveraged life insurance 189 programs shareholders Business loan protection beneficiary designation on assignment of, 204 205 corporate-owned life insurance, deductibility of, 204 189 disposition, as, 204 living buyout, 145 149 benefits of strategy, 205 premiums paid by corporation, 189 deductibility, 204 transfer of ownership of defined, 203 corporate-owned insurance, 191 exempt policy, 204 205 specified insurance benefit, 64 generally, 203 204 taxable conversion benefit, 64 implementation, 204 Bill C-43, 21 29 private corporation, 205 August 29, 2014 draft legislation, 21 tax rules, 204 205 changes to 8 percent rule, 25 Buy/sell arrangements, see also changes to 350 percent test, 25 26 Shareholders, Stop-loss rules changes to actuarial assumptions bare trustee, 237 and reserve methods, 23 24 business insurance trust and, changes to calculation of ACB of 308 309 policy, 26 27 capital dividend account, use of, 236 changes to capital portion of annuity corporate- vs. personally-owned life payments from PACs, 25 insurance, 210 213 changes to dispositions, 27 28 allocation of cost of premiums, changes to joint policies, 26 211 changes to NCPI calculation, 24 25 creditor protection, 211 212 672
Buy/sell arrangements (cont d) Capital dividend account (CDA), ease of administration, 211 175 178, see also Capital dividend policing of policy premiums, 210 election, Dividends potential transfer of ownership, business loan protection strategy 212 and, 205 tax complexity, 211 buy/sell agreements tax leverage, 210 business insurance trusts, 308 309 eligible dividend tax regime, share redemption method, 236 237 221 225 generally, 208 use of, 236 split-dollar insurance arrangements, collateral assignment and, 181 182, 262, 281 282 200 structuring agreement partners, 369 corporation share redemption corporate-owned insured annuity, method, 210, 221 225 447 stop-loss rules and, 222 corporate partners crisscross purchase method, 209 proceeds of insurance policy, cross-purchase method, 214 218 348 351 without use of trustee, 214 217 creditor insurance arrangements and, with use of trustee, 217 218 180 hybrid (combination) method, defined, 180 225 228 donations stop-loss rules, 226 publicly-traded securities, optimization clauses, 229 380 381 overview, 213 estate planning and holding companies, 183 promissory note method, 209, 218 220 keyperson strategy and, 205 208 share redemption method, leverage insurance and, 141 221 225 leveraged insured annuity (LIA), 457 458 C life insurance capital dividend Canada United States Income Tax account, see Life insurance capital Convention (1980), 326, 340 dividend account Capital cost allowance miscellaneous issues, 187 188 recapture of, 149, 162, 379 non-residents, 183 payment of capital dividend, 186 planning to maximize, 183 186 private company shares, gift of, 381 private corporation, of 673
Capital dividend account deemed disposition of, 162 (CDA) (cont d) depreciable, 162, 379 defined, 186 emigration, 332 334 stop-loss rules, 233 235 trusts fifty percent solution, 234 life insurance, 299 314 spousal rollover, 233 Capital replacement, 393 394 Capital dividend election, 187 Carter Commission Report, 2, 6, Capital gains 400 401 deemed disposition, 162 Cash surrender value (CSV), 74 75 donations and, 379 annuity contracts, 411 publicly-traded securities, 380 borrowing against policy, 125 exemption, 104 107, 162 defined, 75 lifetime capital gains, 104 107 full surrender, 81 82 qualified farm property, 162 leveraged insured annuities, qualified small business corporation 456 457 shares, 162 partial surrenders, 82 84 retirement compensation RRSP owning life insurance policy, arrangements, 251 314 315 segregated funds, 380 382, 482 484 spousal trusts, 310 share redemption agreements, transfers 221 225 amalgamations, 122 123 fifty percent solution, 229, 230, 234 corporate-owned insurance transferred to shareholder, spousal rollover, 233 108 112 trust property, 290, 293 intercompany shareholdings, Capital losses 115 119 retirement compensation non-arm s length, 89 arrangements, 251 partner to partnership, 353 segregated funds, 405, 407, 482 484 partnership to partner, 351 share redemption agreement, shareholder to corporation, 221 225 119 122 fifty percent solution, 229, 234 sister companies, 113 115 spousal rollover, 233 wind-ups, 123 trusts term-to-100 policies, 446 life insurance, 292 Certificate of Compliance, 338 Capital property Charitable annuities, see also charitable donations of, 379 Annuities, Annuity contracts, 674
Charitable annuities (cont d) excepted gifts, 382 Deferred annuities, Insured loan back transactions, 382 annuities, Segregated funds non-qualifying securities, 382 general, 437 beneficiary, as, 382, 386 issued after Dec. 20, 2002, 440 444 capital replacement, 393 394 further technical clarifications, 442 444 corporate donations, 377 Income Tax Technical News No. defined, 373 374 26, 441 442 disbursement quota, 376 377 split-receipting, 440 441 10-year gifts, 377 issued before Dec. 21, 2002, donation tax credit, 377 378 437 440 donations benefits of structure, 440 capital property, 379 charitable foundations, and, 440 election, 379 example of how they work, 438 in year of death, 379 financial realities, 439 life insurance, see Gifts general description, 437 438 limits, 379 variations, fixed term annuities, mutual fund, units of, 380 439 non-arm s length, 381 IT-110R3, 374, 438 IT-111R2, 437 441 proceeds of sale of private company shares/real estate, Mortality Tables, 438 439 381 382 Charitable foundations, 440 publicly-listed securities, 380 defined, 373 segregated fund, interest in, disbursement quota, 376 377 394 396 private foundations, 374 segregated funds, gifts of, public foundations, 374 394 396 shares, 392 Charitable giving, see also Charitable annuities, Charity, Gifts stock options, 380 defined, 374 376 tax shelter arrangements, 383 general, 373 excepted gifts, 383, 392 split-dollar insurance arrangements, federal tax credit, 377 283 gifts, see Gifts Charitable organization loan back transactions, 382 defined, 373 374 non-qualifying security, 382 Charity, see also Charitable reduced inclusion rate annuities, Charitable giving publicly-listed securities, 380 anti-avoidance rules, 382 383 stock options, 380 675
Charity (cont d) Corporate-owned insurance, see RRSP or RRIF insurance, 378 also Buy/sell arrangements, Split- tax incentives, 377 384 dollar insurance arrangements, Stoploss rules annual limits, 379 amalgamations, 122 anti-avoidance rules, 382 383 charitable gifts by Bill C-43 changes, 378 379 deductibility, 192 general, 377 deemed retirement compensation tax shelter donation arrangements, arrangement, 207 383 group life insurance, 189 Child deductibility, 189 defined, 90 91 insured annuities Civil Code (Quebec) capital dividend account, 453 collateral assignment cash flow example while (hypothecation), 181 living, 451 Collateral insurance, see Assignment deemed disposition on death, 448 of policy general, 447 Common-law partner tax implications at death, 448, annuity contracts 453 455 rollover, 419 valuation, 453 455 transfer, 419 multi-life insurance, 55 58, 92, 356 deferred annuity retirement compensation rollover, 433 arrangement defined, 168, 416 deeming rules, 261 263 inter vivos transfers, 93 share redemption agreements, rollover, 164 221 225, 229 annuity contracts, 419 shareholder designated as beneficiary, 184, 189 deferred annuity, 433 shares, see Shares share redemption strategies, 221 split-dollar insurance arrangement, transfer of property, 310 see Split-dollar insurance Corporate attribution rules, 107 arrangements Corporate investment stop-loss rules, see Stop-loss rules financial considerations, 242 transfer of policies, 108 123 impact of corporation owning cash amalgamations, 122 value life insurance policy, 241 between related corporations introduction, 241 intercompany shareholdings, post-mortem tax considerations in 115 119 comparing alternatives, 242 245 sister companies, 113 115 676
Corporate-owned insurance (cont d) facts, 142 corporation to insured, 191 structure, 142 corporation to shareholder, tax risks 110 112 RCA rules, 143 145 partner to partnership, 353 retirement redemption, 139 142 partnership to partner, 351 353 facts, 139 shareholder to corporation, structure, 139 119 122 tax risks wind-ups, 123 capital dividend account and, transfers on death 141 to common-law partner, 310 interest deductibility, 140 to spouse, 310 leveraged insurance and, 141 United States estate tax, 318 Creditor wind-ups, 122 protection of Corporation, see also Private buy/sell agreements, 211 corporation, Retirement compensation arrangements (RCA), protection from, 165, 167 Supplementary Executive Retirement partners, 370 Plan (SERP) Creditor insurance arrangements, annuity income 180 reporting requirements, 410 411 capital dividend account and, 180 charitable donations, 377 384 Creditor s life insurance, 200 corporate partner death of, 349 D proceeds of insurance policy, Death benefit, 8 9, 12 16 348 351 advanced, 60 62 sole shareholders, 348 capital gains exemption, 104 107 financial statements, 200 gifts of life insurance to charities, leveraged insurance arrangements 390 living buyout, 145 149 prescribed increase in, 13 facts, 145 defined, 13 structure, 145 146 prescribed premium, 14 tax risks defined, 14 shareholder benefit issue, split-dollar insurance arrangements 146 corporate-owned death benefit, loan outstanding, 147 269 271 time of repayment, 148 employee/shareholder owned pay bonus, 142 145 death benefit, 267 269 677
Death benefit (cont d) keyperson protection, 205 universal life insurance, 49 56 NCPI Deductibility from ACB, 75 77 assignments premiums generally, 191 charitable gift, 192 historical perspective, 194 198 collateral insurance Interpretation Bulletin IT-309R2, generally, 192, 193 198 199 historical perspective, 194 195 related matters, 200 Interpretation Bulletin IT- s. 20(1)(e.2), 195 198 309R2, 198 199 amount deductible, 196 198 related matters, 200 requirements for deductibility, creditor s life insurance, 200 195 196 generally, 189 business loan protection group life insurance, 189 assignment of, 204 registered life insurance policy, charitable gifts 192 corporate-owned insurance, Registered Retirement Savings 190 191 Plans (RRSPs), 192 donations s. 20(1)(e.2), 195 198 corporations, 376 379 amount deductible, 194 198 gifts, 193 requirements for deductibility, group life insurance, 189 195 196 interest retirement compensation arrangements leveraged insured annuity, 458 461 employer contributions, 250 leveraged life insurance program qualifying employee contributions, 250 corporate applications shareholder contributions, 250 retirement redemption, 139 142 split-dollar arrangements immediate borrowing taxable benefit, 274 277 application, 149, 159 Deductions collateral loan to invest, collateral life insurance deduction, 149 151 461 462 policy loan, 154 159 retirement compensation individual retirement arrangements arrangement, 136 139 employer contributions, 250 policy loan, 84 88 qualifying employee segregated funds, 394 396 contributions, 250 678
Deferred annuities, 431 436, see prescribed annuity, 434 also Annuities, Annuity contracts, surrender, 434 Charitable annuities, Insured annuities, Segregated funds partial surrender, 434 accumulating fund, 433 defined, 431 432 accrual taxation, 433 disposition, 432 433 annual reporting, 432, 436 exceptions, 433 annuitant, 431 general, 431 death of, 431, 435 Guaranteed Investment Certificates (GICs) and, 431 contracts last acquired after December 31, 1989 last acquired, 432 accrual taxation, 436 life contingency, 431 annual reports, 436 life insurance, as, 431 annuitization, 436 maturity date, 431 death of annuitant, 436 partial surrender, 434, 435, 436 policy gains, 436 policy gains, 434, 435, 436 surrender, 436 policy loan, 432, 433 partial, 436 prescribed annuity, 402 404, 410, contracts last acquired after March 411 413, 434, 435 31, 1977 and before January 1, defined, 410, 646 1990 payments, 402 404 adjusted cost base, 435 registered, 436 annual reports, 435 surrender, 434, 435, 436 annuitization, 435 transfer, 433 death of annuitant, 436 Deferred Profit Sharing Plan, 248, general, 435 406, 409 policy gains, 435 Demutualization prescribed annuity, 435 defined, 63 surrender, 435 partial surrender, 435 tax regime, 64 65 contracts last acquired prior to April Dependants, 161 1, 1977 Disposition, see also Proceeds of accrual taxation, 433 disposition, Surrender of policy adjusted cost base, 433 annuitization as, 11 annuitization, 434 annuity contracts, taxation of, death of annuitant, 435 400 403, 417, 422 general, 433 change of trustees, 302 policy gains, 433 deemed disposition on death, 3 4 679
Disposition (cont d) Dividend options corporate-owned insured annuity, accumulate at interest, 46 453 455 cash, 45 deferred annuity, 433 exempt policies, 165 166 funding tax liability, 162 purchase bonus paid up additions, leveraged insured annuity, 456, 46 457, 462 reduce premiums, 46 non-residents clearance requirements, 336 339 term insurance enhancements, see Term insurance Dividends buy/sell agreements, 233 234 personally-owned insured annuity non-prescribed, 447 capital dividend account, see Capital prescribed, 447 dividend account policy dividends, 88 capital dividends, 175 178 valuation, 98 103 buy/sell agreement deemed disposition rules on business insurance trust, emigration, 332 334 exceptions, 332 333 deferred annuities, 433 defined, 69 71 exclusions, 71 74 308 309 share redemption method, 221 225 defined, 176 election, 175 leveraged insured annuity, general rules, 68 457 458 non-residents payment of, 186 clearance requirements, 336 339 declaration, 186 dual residents, 335 deemed, 221 general, 335 eligible dividend tax regime, 236 237 taxable, 335 tax treaties, impact of, 341 nature of, 64 other properties deemed disposed of, participating whole life insurance, 104 see Participating whole life insurance terminology, 68 policy, see Policy dividend transfer of ownership, 88 tax-free, 159, 175 trusts Double taxation 21-year deemed disposition rule, 301 302 dual residents, 335 under promissory note method, non-united States persons, 326 329 107 108 segregated funds, 484 680
Double taxation (cont d) estate taxes, 164 share redemption agreements, funding deemed disposition, 162 221 225 other costs, 164 United States estate tax, 318 320 planning Draft legislation of August 29, 2014, capital dividend account and, 175, see Bill C-43 183 preservation of, 162 E probate fees, 164 Election replenishing, 166 capital dividend election, 175 177 RRIFs, 162 charitable donations RRSPs, 162 capital property, 379 share redemption agreement, out of spousal rollover, 94 221 222 Emigration, 332 334 United States estate taxes, see corporate-owned policies, 334 United States tax considerations and estate planning deemed disposition, 332 334 exceptions, 333 Exempt policy, see also Disposition fair market value, 332 business loan strategy and, 204 205 immigration, 333 334 cash values of, 165 individuals, 333 collateral assignment, 165 property subject to, 332 333 dividend options, 171 reporting requirements, 334 exempt test, 173, see also Exempt test tax, 332 gifts to charities, 381 taxable Canadian property, 332 intergenerational transfers, 171 172 Employee inter vivos family trusts, 171 172 benefits, 189 190 introduction of, 7, 8 10 group life insurance premiums, keyperson insurance strategy and, 189 205 premiums paid by corporation, leveraging, 171, see also Leveraged 189 190 life insurance programs split-dollar insurance arrangements non-residents employee-owned death benefit, clearance requirements, 336 339 267 269 policy dividend, 171 Estate policy loans, 170 collateral insurance, 165 probate fees and, 164 create, 165 retirement compensation equalization, 166 arrangements, 309 681
Exempt policy (cont d) non-qualifying security, 382 split-dollar arrangements, 173 partnership property supplementary executive retirement death of corporate partner, 348 plans, 245 246 partnerships life insurance funded strategies funding buy/outs with life front end leveraged RCA insurance (FELRCA), 259 crisscross method, 356 359 leveraged life insured SERP strategy, 255 basic, 356 life insured SERP strategy, 254 basic with corporate partners, 357 split-dollar life insured strategy, 257 beneficiary designated, 359 tax exempt accumulations, 165 trustee d, 359 taxation of, 67 95 partnership purchase of interest, term-to-100, 446 361 365 withdrawals, 170 corporate partners, 363 individual partners, 361 Exempt test, see also Bill C-43 surviving partners purchase background, 16 18 interest, 363 364 draft legislation of August 23, 2013, 20 21 shares held by spousal trust, 103 104 federal budget of 2012, 18 20 transfers between intercompany F shareholdings, 115 117 wind-ups, 122 Fair market value cash surrender value and, 104, 106 Family business succession planning charitable donations introduction, 231 capital property, 379 role of life insurance in common family business succession plans, corporate-owned insured annuity, 238 240 453 455 sale to successor during life for deemed disposition on emigration, promissory note, 238 332 334 deemed disposition upon death, transfer at death to successor, 98 103 239 240 corporate-owned life insurance on use of estate freeze to transfer deceased shareholder, related parties ownership to successor during and other shareholders, 98 100 life, 239 interest in life insurance, 96 97 Federal budget leveraged insured annuity, 456 458 1968, 2 4 life insurance shares, 101 103 relief for existing policies, 4 682
Federal budget (cont d) taxation of policy gains on disposition, 3 4 Index immediate borrowing application, 149 154 individual retirement application, 136 139 1977, 4 5 new tax anniversary date, 5 Gifts policy loans as disposition, 5 capital replacement, 393 394 1981, 5 6 charitable, see also Charity 2012, 18 20 defined, 374 376 Financial Accounting Standards split-dollar policy, 375 Board (FASB), 201 Foreign life insurance foreign property reporting rules, 341 342 general, 341 taxation of, 342 Forms Form T733, 247 Form T1135, 341, 342 deductibility, 192 excepted, 383, 392 life insurance general, 89, 384 385 IT-244R3, 388 389 methods of gifting bequest of proceeds, 386 charity-owned policy, 387 388 assignment of policy, 388 benefits of, 390 Form T1161, 334 disbursement quota and 10- Form T2054, 186, 187, 497 year gifts, 376 377 Form T2062B, 337, 338 tax consequences of transfer, Form T2064, 338 390 Form T2068, 338 value of policy, 388 389 donor-owned policy, 390 391 Form T2210, 86, 158, 525, 573 general, 387 Form T4A, 505, 515 types of policies, 387 T5 Supplementary, 515 non-qualifying security, 382 383 G other insurance supported gifts, 392 394 General Anti-Avoidance Rule private company shares, 392 393 (GAAR), 462 464 segregated funds, 394 396 applicability, 462 defined, 462 Governance, 65 leveraged insurance arrangements Grandfathered policies, 7, 11 15 application re interest effects of changes made to, 11 15 deductibility, 130 132 stop-loss rules, 226 general areas of concern, 132 134 tax rules, 11 12 683
Group life insurance premiums Income Tax Folios benefits, 189 S3-F6-C1, Interest Deductibility, 86, deductibility of, 191 126, 128, 129, 140, 158, 370, 460, 553 Guaranteed Investment Certificates (GICs), 431 Income War Tax Act, 1917, 2, 398 Guaranteed Investment Funds Information Circular (GIFs) IC 72-17R6, 336 defined, 487 IC 89-3, 96, 98, 99, 100, 106, 108, hybrid allocation method, 487 109, 110, 112, 116, 121, 334, 352, time weighted units, 482 388, 579 Insured H defined, 165, 170 History of life insurance taxation, Insured annuities, see also 1 29 Annuities, Annuity contracts, Holding companies, 183, 212, 233 Charitable annuities, Deferred split-dollar insurance arrangements, annuities, Leveraged insured 283 annuities, Segregated funds advantages, 446 Hypothecation, 181 annuity characteristics, 445 I charitable context, 469 Immigration, see Emigration corporate-owned accounting for, 455 Income advantages, 455 456 accrued, 400 411 capital dividend account, 453 calculation of, 400 411 cash flow example, 451 452 defined, 410 general, 451 partnerships, 345 planning considerations, 455 458 unallocated, 425 tax implications at death, Income averaging annuity contracts 453 455 (IAACs), 400 401 valuation, 454 455 Income Tax Act defined, 445 excerpts, 605 637 disadvantages, 446 Income Tax Act Regulations insurance characteristics, 445 446 excerpts, 639 668 leveraged insured annuities before Mar. 21, 2013 advantages, 456 general, 456 general description, 457 458 684
Insured annuities (cont d) leveraged insured annuity, risks involved 459 460 collateral life insurance leveraged life insurance program deduction, 461 462 corporate applications deemed disposition at death, retirement redemption, 462 140 141 early payment penalty, 458 GAAR, 130 132 general, 458 immediate borrowing General Anti-Avoidance Rule application, 150 (GAAR), 462 464 collateral loan tied to policy, interest deductibility, 459 461 155 156 interest rate fluctuations, 458 policy loan, 157 158 tax shelter rules, 464 465 partnership agreement, 369 370 leveraged insured annuities on or policy loan, 84 85 after Mar. 21, 2013 segregated funds, 485 consequences of being LIA rate fluctuations, 458 policy, 467 469 Intergenerational transfers, 90 93, general, 465 171 173 life insurance policy (LIA), International Financial Reporting 466 467 Standards (IFRS), 66 non-prescribed annuities, 448, 453, 457 International issues owner profile, 446 447 emigration, see Emigration personally-owned general, 317 cash flow example, 448 non-residents, see Non-residents general, 447 United States estate taxes, see United States tax considerations and planning considerations, 449 estate planning treatment at death, 448 449 Interpretation Bulletins prescribed annuities, 434, 435, 436 IT-66R6, 177, 497 term-to-100 life insurance policy, 446, 453, 457, 462 IT-67R3, 117 trusts, owned by, 449 450 IT-87R2, 67, 504 IT-110R3, 374, 438 Insurer IT-111R2, 437, 438, 439, 440, 441, property 602 segregated funds, 394 IT-242R, 346 Interest IT-244R3, 388, 389, 516 deductibility IT-278R2, 347 Income Tax Folio S3-F6-C1, 553 IT-309R, 194, 195, 198 685
Interpretation Bulletins (cont d) Level premium system, 35 40 IT-309R2, 193, 196, 198, 199, 519 calculation, 39 40 IT-355R2, 86, 158, 523 Leveraged insured annuities (LIAs) IT-365R2, 472, 473, 475, 478, 527 (on or after Mar. 21, 2013) IT-408R, 193, 315, 532 consequences of being, 467 469 IT-416R3, 534 defined, 466 467 IT-430R2, 141, 179, 180 general, 465 IT-430R3, 141, 180, 181, 182, 200, Leveraged life insurance programs 349, 350, 355, 535 corporate applications examples IT-447, 295 living buyout, 145 149 IT-529, 539 analysis, 146 Irrevocable life insurance trusts facts, 145 (ILIT), 164, 309, 324 326, 329 structure, 145 146 Ives Commission, 399 400 tax risks K at time of repayment, 148 149 Keyperson insurance protection shareholder benefit issue, benefits of strategy, 205 206 146 147 deductibility, 207 use of capital dividend defined, 205 account, 149 exempt policy, 207 valuation of shares, 149 general, 205 while loan is outstanding, 147 148 implementation, 206 pay a bonus, 142 145 identify problem, 206 analysis, 142 initiate plan in event of death, 206 facts, 142 solve problem, 206 structure, 142 private corporation, 207 tax risks retirement compensation RCA rules, 143 145 arrangement and, 281 retirement redemption, 139 142 split-dollar insurance arrangements, analysis, 140 281 facts, 139 tax rules, 207 structure, 139 140 tax risks L capital dividend account and, Lenders 141 142 insurance proceeds received by, interest deductibility, 179 183 140 141 686
Leveraged life insurance individual retirement application programs (cont d) example, 136 139 exempt life insurance policy, facts, 136 170 171 financial risks immediate borrowing application banking risks, 138 example, collateral loan, 149 151 interest rate risk, 137 138 analysis, 150 leveraging indexed accounts, collateral insurance deduction, 138 151 life expectancy, 139 facts, 149 performance of product, 137 financial risk, 151 use of illustrations, 137 interest deductibility, 150 structure, 136 structure, 150 tax risks immediate borrowing application GAAR, 139 10/8 plans historical reference, interest deductibility, 139 151 159 overview, 125 background and legislative changes, 151 154 aggressive tax planning, 135 136 10/8 collateral loan tied to compound interest, 127 policy prior to 2013 budget General Anti-Avoidance Rule analysis, 155 (GAAR), application of, 130 134 collateral insurance deduction, proposed legislation withdrawn, 156 129 simple interest, 126 facts, 154 special rules in Quebec, 129 financial risk, 156 partnership retirement obligations, GAAR, 155 368 369 interest deductibility, 155 156 Life insurance structure, 154 assignment of, see Assignment 10/8 policy loan prior to 2013 benefits of personal insurance budget creditor protection during life, analysis, 157 167 170 collateral insurance deduction, funding needs at death, 161 166 159 estate creation, increase or facts, 156 replenish, 166 financial risks, 159 estate equalization, 166 interest deductibility, 157 158 estate preservation, 162 165 policy loan interest, 158 collateral insurance, 165 structure, 156 157 estate taxes, 164 687
Life insurance (cont d) probate fees and other estate costs, 164 165 Index impact of legislation and accounting standards, 65 Life insurance capital dividend tax liability for deemed account (LICDA), 15 16, 178 dispositions, 162 164 Life insurance policy tax liability for registered plans, 164 accounting protecting dependants, 161 162 authoritative support, 201 intergenerational transfers of, financial reporting, 201 202 171 173 annuitized, 3 4 leveraging, 170 cash value, 301 other personal insurance charitable gift, as, 376 377 strategies, 173 deemed disposition, see Disposition policy loans, 170 deferred annuities, 431 withdrawals, 170 defined, 1 defined, 1 disposition of, see Disposition gifts to charities, see Gifts emigration, 332 transfer of ownership gift, as, 384 corporate distributions, 89 general, 89 historical perspective general rule, 89 conclusion, 29 generational transfers, 90 1968 federal budget, 2 4 gifts, 89 relief for existing policies, 4 taxation of policy gains on intergenerational transfers, 171 173 disposition, 3 4 inter vivos transfer to 1977 federal budget, 4 5 spouse/common-law partner, 93 new tax anniversary date, 5 non-arm s length, 90 policy loans as disposition, 5 tax-free rollovers, 90 95 1981 federal budget, 5 6 to spouse/common-law partner at Carter Commission Report, 2 death, 94 introduction, 1 trusts investing in, 281 283 Notice of Ways and Means Motion, 7 16 Life insurance companies accounting standards for recognition pre-1968, 2 and measurement of financial assets of insurers, 65 disclosure in respect of participating and adjustable life insurance policies, 65 688 owned by RRSP, 314 trust, see Trusts proceeds of
Life insurance policy (cont d) participating policyholders, 63 64 received by corporate partners, demutualization, 63 349 351 demutualization benefits tax received by individual partners, regime, 64 348 349 permanent, 34 36 received by lenders, 179 183 gifts to charities, 386 received by private corporation, 178 limited-pay whole life, 44 received by trust, 178 179 participating vs non-participating, reporting 34 35 authoritative support, 201 pricing of, 35 41 financial, 201 traditional whole life, see Traditional whole life transfers of, 108 123 univeral life, see Universal life amalgamations, 122 substitute life, 92 between related corporations intercompany shareholdings, term, see Term insurance 115 119 term-to-100, 43, 59, 98, 166, 389, sister companies, 113 115 446, 453, 462 corporation to insured, 191 universal life, see Universal life corporation to shareholder, valuation of, 95 97 110 112 variable life insurance policies, partner to partnership, 353 62 63 partnership to partner, 351 353 Life insurance shares, 101 103 shareholder to corporation, 119 122 Limited-pay whole life insurance, 44 wind-ups, 123 Lump sum payments, 471 472, valuation of, 95 98 474 475 Life insurance products M advanced death benefits, 60 62 Maximum Tax Actuarial Reserve coverage options, 52 54 (MTAR), 7, 411, 423 multi-life, 56 Mortality tables, 10, 31, 438 private corporation situations, 56 Mutual fund trusts, 407, 481 482, 483 splitting of, 58 single life and joint, 56 Mutual funds, 398, 481 482, 483, general, 62 487 non-forfeiture options, see charitable donations of, 380 381 Non forfeiture options GIFs and, 487 689
N life insurance capital dividend account, 15 16 Net amount at risk, 52, 55, 76 tax rules, 11 12 Net cost of pure insurance (NCPI), 7 rules prior to 2017 calculation of, 10, 76 accrual taxation, 7 8 changes to calculation, 24 25 annuitization as disposition, 11 collateral insurance and, 198 exempt policies, 8 10 deduction from ACB, 76 pro-rating ACB, 11 reduction of ACB by, 10 11, 76 reduction of ACB by NCPI, split-dollar insurance arrangements 10 11 premium based on term insurance, 272 O transfers, 279 Office of the Superintendent of Non-arm s length transfers, 89 Financial Institutions (OSFI), 476 grandfathered policies, 11 16 Options Non-forfeiture options, 58 60 dividend options, see Dividend automatic premium loan, 60 options cash value, 58 investment options, 50 51 extended term values, 60 non-forfeiture options, see Non- reduced paid-up values, 59 forfeiture options Non-residents P Canadian purchaser, 336 338 Partner, see also Partnership, clearance requirements, 336 339 Partnership agreement dual-residents, 335 death of corporate partner, 348 general, 336 death of individual partner, 346 insured non-resident, 183 liability, 343 insurer non-resident, 183 life insurance policy transferred to, inter vivos gift or non-arm s length 351 352 transfer, 338 339 proceeds of life insurance policies non-resident purchaser, 339 and tax treaties, 339 340 corporate partners, 349 351 taxable dispositions, 336 individual partners, 348 349 Notice of Ways and Means Motion retirement, 346 and Bill C-139, 7 16 old rules (grandfathered policies) pre-1982 funding the withdrawal of, 366 367 transferring life insurance policy to effect of changes to, 12 15 partnership, 353 690
Partnership, see also Partner, Partnership agreement, see also Partnership agreement Partner, Partnership agreement, see Partnership funding agreement creditor protection, 370 371 annuities funding buy/outs with life reporting requirements, 401 insurance defined, 343 choosing structure for, 366 financial statements, 200 crisscross method, 356 360 general, 343 basic, 356 general taxation of, 344 348 basic with corporate partners, death of individual partner, 347 357 death of sole shareholder of beneficiary designation, 359 corporate partner, 348 trustee d, 358 income, 345 general, 356 partner retirement, 346 partnership purchase of interest, partnership interest, 346 361 365 year-end, 345 corporate partners, 363 income, 345 individual partners, 361 insurance needs, 353 356 splitting the premium, 365 collateral insurance, 354 356 surviving partners purchase funding partnership agreement, interest, 364 see Partnership agreement general, 344, 356 key partner coverage, 354 interest deductibility, 369 370 personal insurance, 353 354 partnership retirement obligations, liability, 343 366 370 limited liability partnership (LLP), general, 356 344 leveraged life insurance, 368 proceeds of life insurance policies magnitude of obligation, 367 and, 348 351 pay-as-you-go, 367 individual partners, 348 349 sinking fund, 367 corporate partners, 349 351 with life insurance, 368 transferring policy to partner, general, 344 351 352 Personal injury transferring policy to partnership, 353 defined, 472 474 unlimited liability, 343 344 Plaintiff year-end, 345 taxation of, 471 472 691
Policy exempt, 6, 7, 8 10, 16 interest in adjusted cost base defined, 4, 6 Policy dividend, 88, 171, 196 non-residents clearance requirements, 336 339 Policy gains deferred annuity, 435 disposition of interest, 68 non-residents, 336 transfer of ownership, 88 Index registered life insurance policy, 192 Registered Retirement Savings Plans (RRSPs), 192 defined, 5 group life insurance, 189 level premium calculation, 31 33 level premium system, see Level premium system loan, 60 paid by corporation on personallyowned insurance, 190 partnership buyouts crisscross method, 356 359 basic, 356 Policy loan, 5, 69, 72, 74, 75, 84 88 basic with corporate partners, Policyholder 357 borrowing against policy, 125 beneficiary designated, 359 taxation of, 1 2 trustee d, 358 Carter Commission, 2 splitting premium, 365 Premiums prescribed, 12 15 calculation of, 31 33 split-dollar insurance arrangements deductibility of general, 267 charitable gift, 193 premium split based on cash value, 272 premium split based on term insurance, 272 collateral insurance generally, 193, 194 historical perspective, 194 195 Interpretation Bulletin IT- 309R2, 198 199 related matters, 200 s. 20(1)(e.2), 195 198 amount deductible, 196 requirements for deductibility, 195 Premiums payable under a life insurance policy defined, 75 Prescribed annuity contracts (PACs), 25, 403 404, 412, 417 Pricing elements of premium calculations creditor s life insurance, 200 expenses, 32 33 employee benefits, 193 general, 31 generally, 191 192 investment income, 33 group life insurance, 189 lapse, 33 692
Pricing (cont d) mortality, 31 32 impact of assumptions, 33 level premium calculation, 39 40 permanent policies, 35 38 Index life insurance, 297 deemed disposition, see Disposition property subject to emigration tax, 332 333 segregated funds, 395 396 taxable Canadian property, 332 trust property, 290 United States situs assets, 164, 318 Private corporation business loan protection strategy, 204 capital dividend account, 175 Q keyperson insurance strategy and, 205 208 life insurance proceeds received by, 178 183 shares, 104, 162, 241 tax integration, 175 Quebec Probate fees, 164 165 beneficiaries, 165 gifts of life insurance, 386, 390 Civil Code Qualified farm property, 162 Qualified small business corporation mutual funds, 482 collateral assignment personally-owned insured annuities, (hypothecation), 181 447 trust provisions, 288, 294, 300 segregated funds, 482 testamentary insurance trusts and, R 289, 297, 298, 303 Registered Retirement Income Proceeds of disposition Funds (RRIFs), 162, 164, 167, 168, 247, 252, 326, 333, 377, 378, 391, adjusted cost base, 75 77 393, 413 in excess of, 3 4 RRIF insurance, 393 annuity contracts, 398, 417 419 Registered Retirement Savings Plans defined, 74 (RRSPs), 136, 162, 164, 167, 168, dividends, 3 4 193, 247, 252, 314 315, 326, 333, policy dividends, 88 377, 378, 391, 393, 394, 400, 401, 402, 411, 413, 427 Promissory note IT-408R, 193, 315 disposition of shares under, 107 108 owning life insurance policy, Property 314 315 capital property RRSP insurance, 192 deemed disposition of, 162 segregated funds, 400, 402, 411 depreciable, 162 trusts and life insurance, 314 315 emigration, 332 334 trusts 693
Regulations, 639 668 deductibility 201, 468 employer contributions, 246 247 300, 21, 25, 403, 412, 427, 439, 443 prohibited investment, 247 301, 420, 421, 422, 428 qualifying employee 304, 13, 166, 313, 402, 404, 411, contributions, 247 413, 416, 417, 442, 447, 450, 451 shareholder contributions, 247 305, 13, 426 deeming rules, 261 263 306, 8, 9, 21, 22, 25, 26, 73, 468 defined, 248 307, 7, 8, 21, 22, 76, 83, 411, 419 front end leveraged RCA 308, 10, 21, 24, 25, 26, 27, 76, 197, (FELRCA), 259 261 198, 420 general, 245 309, 11, 12, 13, 425 introduction, 245 247 310, 20, 21, 22, 26, 412 PACs, 403 1400, 475 salary deferral arrangements (SDA), 1401, 7, 21, 23, 24, 25, 26, 27, 73, 248 250 77, 83, 411, 423 SERP, 253 254 2101, 187 split-dollar insurance arrangements, 3702, 376 282 4900, 314 taxation of, 250 253 winding up, 263 265 Reports annuities Rollover reporting requirements, 401 403 children, 90 93 deferred annuities, 431 common-law partner, 94 95, 163, 419 financial statements deferred annuity, 433 corporations, 200 grandchildren, 90 93 partnerships, 200 intergenerational transfers, 90 93 retirement compensation arrangement, 265 RRIFs, 164 RRSPs, 164 Restricted financial institution spousal rollover, 90 93, 163 defined, 195 annuity contracts, 419 Retirement compensation deferred annuity, 434 arrangements (RCA), see also Supplementary executive retirement partnership property, 348 351 plan (SERP) share redemption structures, accounting for RCA funded by life 221 225 insurance, 265 survivor spouse, 163 anti-avoidance rules, 247 tax-free, 90 audit initiative by CRA, 247 trust property 694
Rollover (cont d) registered investments, as, 485 486 life insurance, 297 299 residency, 486 securities, as, 405 S surrender, 405 408 Segregated funds, see also Annuities taxation of acquisition fees, 485 general, 482 483 adjusted cost base, 404 408 income earned in fund, 483 484 annuities, 403, 404 408 1970-1977, 405 406 capital gains/losses, 405 1978-present, 406 408 charitable donations of, 380 time-weighted units, 482 deemed disposition, 484 defined, 482 emigration exception, 333 T5 Supplementary form, 405 deemed inter vivos trust, 406 transfers in and out of fund, 405 defined, 398, 404 408, 481 withholding taxes and, 486 disposition of interest in, 484 Shareholders dividend tax credit, 405 agreement, 208, 213 229 double taxation, potential for, 484 benefits, 189 flow-through treatment, 405 beneficiary designation on fund on fund investments, corporate-owned life insurance, 486 487 190 general, 1, 404, 481 living buyouts, 145 149 Guaranteed Investment Funds premiums paid by corporation, (GIFs), 487 189 guarantee top-up payments, 488 transfer of ownership of guarantee withdrawal benefits, 488 corporate-owned insurance, 191 held by corporations, 489 491 business insurance trusts, 308 309 history, 405 408 buy/sell agreements, see Buy/sell hybrid allocation method, 487 arrangements interest deductibility, 407, 485 deductibility introduction of, 405 408 retirement compensation investment management fees, 485 arrangements, contributions to, 245 248 maturity, 481 482 leveraged insurance to pay bonus to, mutual funds and, 405 408, 142 145 481 482 sole shareholders, death of, 349 non-resident insurer, 486 split-dollar insurance arrangement, non-resident purchaser, 486 see Split-dollar insurance property of, 406 arrangements 695
Shareholders (cont d) buy/sell arrangements, 281 282 transfer of policies, 108 123 charitable gift, as, 283, 289, 375 corporation to shareholder, defined, 267 109 111 executive benefits, 280 shareholder to corporation, family situations, 282 117 121 financing policy deposits Shares general, 272 buy/sell agreements, see Buy/sell arrangements premium split based on cash value, 273 capital gains exemption, 104 105 premium split based on term charitable donations of, 380 insurance, 272 deemed disposition upon death, generally, 267 98 103 holding company, 283 corporate-owned life insurance on deceased shareholder, related keyperson insurance, 281 parties and other shareholders, premium allocation 98 103 general, 272 life insurance shares, 101 103 premium split based on cash disposition of value, 273 under promissory note, 107 108 premium split based on term insurance, 272 gifts retirement compensation private company shares, 381 arrangements, 282 grandfathered situations using arrangements stop-loss rules, 231 buy/sell arrangements, 281 282 held by spousal trust, 103 104 executive benefits, 280 qualified small business corporation family situations, 282 shares, 162 holding company, 283 share redemption agreement, 221 225, 229 keyperson insurance, 281 stop-loss rules, see Stop-loss rules retirement compensation arrangements, 282 valuation of, 98 104 Supplementary Employment Specified insurance benefit Retirement Plan defined, 64 split-dollar life insured SERP Split-dollar insurance arrangements, strategy, 254 261 267 285 tax treatment adjusted cost basis, 279 280 assessing benefit, 274 276 agreements, 284 characterizing taxable benefit, 277 alternative to, 284 deductibility of benefit, 278 696
Split-dollar insurance Stop-loss rules, 229 235 arrangements (cont d) application, 229 230 employee vs. shareholder, buy/sell agreements 277 278 hybrid method, 209, 225 general, 273 share redemption method, 221, quantifying the benefit, 276 223 225 transfers, 279 grandfathering rules, 230 233 types planning, 233 235 corporate-owned death benefit, fifty-percent solution, 234 235 269 271 spousal rollover, use of, 233 234 employee/shareholder owned death benefit, 267 269 share redemption agreements, 229 235 general, 267 summary, 235 uses, 267 Structured settlements Split receipting arrangements advantages of, 477 further clarifications, 442 444 annuity qualifying as, 471 general rules, 440 assignment of, 476 Technical News No. 26, 441 442 benefits to payor, 478 Spousal trust, 310 314 casualty insurer, taxation of, 471, insurance policy, 311 473, 475 rollover, 163, 233 234 defined, 471 share redemption strategies, 221 disadvantages, 477 shares held by, 103 104 discount method, 478 United States estate tax discount rate, 478 tax credit relief, 328 financial reporting, 476 Spouse general, 471 annuity contracts inflation and, 478 rollover, 419 lump sum payments and, 471, 472, transfer, 420 474 475 deferred annuity owner, taxation of, 475 476 rollover, 433 plaintiff, taxation of, 471 472 transfer to, 433 practical application, 477 inter vivos transfers, 93 recipient, taxation of, 471 472, 474 share redemption strategies reserve, 475 476 rollover, 221 social benefit, 472 474 spousal attribution rules, 94 social policy, 474 475 tax-free rollovers, 90 technical requirements, 472 473 697
Succession plan, 237 Taxable Canadian property Succession planning, see Family defined, 332 business succession planning disposition, 332 Supplementary executive retirement Taxable conversion benefit plan (SERP), 254 261 defined, 64 defined, 246 Technical News funded, 246 No. 12, 589 generally, 246 No 26, 595 investment options, 253 Term insurance, 34, 41 43 life insurance strategies conversion features, 41 42 front end leveraged RCA attained age conversion, 41 (FELRCA), 259 261 original age conversion, 42 leveraged life insured SERP strategy, 255 257 enhancements life insured SERP strategy, 254 one year term to insure cash value, 47 split-dollar life insured SERP strategy, 257 259 options, 47 unfunded, 246 premium offset, 48 forms of, 42 Surrender of policy annual renewable term, 43 annuity contracts, 400, 418, 432 10- and 20-year renewable term deferred annuity, 432 insurance, 43 defined, 81 level term insurance, 43 full surrender, 81 82 general attributes, 41 non-residents gifts to charities, 376 clearance requirements, 336 group term insurance, 376 partial surrender, 82 84, 434 joint coverages, 42 segregated funds, 484, 485, 488 joint first-to-die, 42 joint last-to-die, 42, 306 T split-dollar insurance arrangements Tax integration NCPI, 272 defined, 175 premium split, 272 Tax shelter donation arrangements, Traditional whole life, 45 48 383 credit options, 45 48 Tax shelter rules, 464 accumulate at interest, 45 Tax Relief Reconciliation Act, 2001, cash, 45 321 premium offset, 48 698
Traditional whole life (cont d) purchase paid-up additions, 45 Index attribution planning, 303 avoidance of 21-year rule, 301 302 reduce premiums, 45 term insurance enhancements, 47 business insurance trusts, 308 309 enhancement options, 47 change of trustee, 302 303 one-year term to insure cash joint partner trusts, 297 value, 47 RRSPs, 314 315 coverage options, 48 retirement compensation Trust arrangements, 309 21-year deemed disposition rule, spousal trusts, 310 314 301 302 testamentary insurance trusts, Crummey trust, 325 303 307 alter ego trust, 297 298, 301, 328, United States estate tax and, 309 414 mutual fund trust, 407, 481 483 attribution planning, 303 property, 287 289 attribution rules, 296 Quebec provisions, 162, 288, 294, beneficiaries, see Beneficiaries 300 business insurance trusts, 308 309 retirement compensation buy/sell agreements, 308 309 capital property life insurance as, 299 300 cash value life insurance policy, 301, 303 change of trustees, 302 Crummey trust, 325 defined, 287 289 generally, 287 income, 296 insurance proceeds received by, 178 179, 299 inter vivos family trusts, 173 inter vivos trusts, 307 investments, 299 irrevocable life insurance trusts (ILIT), 309 joint partner trusts, 297 298, 417 arrangements, 309, see also Retirement compensation arrangements, Supplementary Executive Retirement Plan (SERP) segregated fund trust, see Segregated funds SERP, see Supplementary Executive Retirement Plan (SERP) spousal trusts, 310 314 insurance policies, 310 314 rollover, 163 shares held by, 103 United States estate tax, 309 taxation of attribution rules, 296 conduit taxed as individual, 290 291 general considerations, 290 296 life insurance and, 299 301 residence of trust, 295 296 alter ego trusts, 310 types of personal trusts, 291 295 699