Income Tax Regulations

305 (1) For the purposes of section 12.2 and paragraph 56(1)(d.1) of the Act, the amount at any time of “unallocated income accrued in respect of the interest before 1982, as determined in prescribed manner”, in respect of a taxpayer’s interest in an annuity contract (other than an interest last acquired after December 1, 1982) or in a life insurance policy referred to in subsection (3), means the amount, if any, by which

• (a) the accumulating fund at December 31, 1981 in respect of the interest

exceeds the aggregate of

• (b) his adjusted cost basis (within the meaning assigned by paragraph 148(9)(a) of the Act) at December 31, 1981 in respect of the interest; and

• (c) that proportion of the amount, if any, by which the amount determined under paragraph (a) exceeds the amount determined under paragraph (b) that

  • (i) the aggregate of all amounts each of which is the amount of an annuity payment received before that time in respect of the interest

  is of

  • (ii) the taxpayer’s interest, immediately before the commencement of payments under the contract, in the total of the annuity payments

    • (A) to be made under the contract, in the case of a contract for a term of years certain, or

    • (B) expected to be made under the contract, in the case of a contract under which the continuation of the payments depends in whole or in part on the survival of an individual.

(2) For the purposes of paragraph (1)(c), “annuity payment” does not include any portion of a payment under a contract the amount of which cannot be reasonably determined immediately before the commencement of payments under the contract except where such portion cannot be so determined because the continuation of the annuity payments under the contract depends in whole or in part on the survival of an individual.

(3) For the purposes of this section, an interest in an annuity contract to which subsection 12.2(9) of the Act applies shall be deemed to be a continuation of the interest in the life insurance policy in respect of which it was issued.