Income Tax Regulations

2402 For the purposes of clause 138(3)(a)(iii)(B) of the Act and 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 that proportion of the insurer’s gross Canadian life investment income for the year that

  • (i) the aggregate of the insurer’s mean maximum tax actuarial reserve for the year in respect of participating life insurance policies in Canada and the mean amount on deposit with the insurer for the year in respect of those policies

  is of

  • (ii) the aggregate of amounts, each of which is

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

    • (B) the mean amount on deposit with the insurer for the year in respect of a class of policies described in clause (A);

• (a.1) there shall be included the amount determined by the formula

  (A + B) × C/D

  where

  A

  is the amount required by subsection 142.5(5) of the Act to be included in computing the insurer’s income for the year,

  B

  is the amount deemed by subsection 142.5(7) of the Act to be a taxable capital gain of the insurer for the year from the disposition of property,

  C

  is the amount determined under subparagraph (a)(i) for the taxation year of the insurer that includes October 31, 1994, and

  D

  is the amount determined under subparagraph (a)(ii) for the taxation year of the insurer that includes October 31, 1994;

• (b) there shall be included

  • (i) the amount deducted by the insurer under subparagraph 138(3)(a)(iv) of the Act in computing its income for the immediately preceding taxation year,

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

  • (iii) 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;

  • (iv) [Repealed, SOR/2009-222, s. 2]

• (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) except as otherwise provided in paragraph (a), there shall not be included any amount 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;

• (e) except as provided in paragraph (a), there shall not be included any amount that was included in determining the insurer’s gross Canadian life investment income for the year;

• (e.1) except as provided in paragraph (a.1), there shall not be included the amounts referred to in the descriptions of A and B in that paragraph;

• (e.2) if the year includes October 31, 1994, there shall be deducted the amount determined by the formula

  (A + B) × C/D

  where

  A

  is the amount deducted under subsection 142.5(4) of the Act in computing the insurer’s income for the year,

  B

  is the amount deemed by subsection 142.5(6) of the Act to be an allowable capital loss of the insurer for the year from the disposition of property,

  C

  is the amount determined under subparagraph (a)(i) for the year, and

  D

  is the amount determined under subparagraph (a)(ii) for the year;

• (f) 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;

  • (iii) [Repealed, SOR/2009-222, s. 2]

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

• (h) except as provided in paragraph (a), no deduction shall be made in respect of

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

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

• (h.1) except as provided in paragraph (e.2), no deduction shall be made in respect of the amounts referred to in the descriptions of A and B in that paragraph;

• (i) except as otherwise provided in paragraph (f), 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

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