Income Tax Regulations — 1401
1401 (1) For the purposes of applying section 307 and subsection 211.1(3) of the Act at any time, the amounts determined under this subsection are, (a) in respect of a deposit administration fund policy, the total of the insurer’s liabilities under the policy calculated in the manner that (i) if the insurer is required to file an annual report with its relevant authority for a period that includes that time, is required to be used in preparing that report, and (ii) in any other case, is required to be used in preparing its annual financial statements for the period that includes that time; (b) in respect of a group term life insurance policy that provides insurance for a period not exceeding 12 months, the unearned portion of the premium paid by the policyholder for the policy at that time determined by apportioning the premium paid by the policyholder equally over the period to which that premium pertains; (c) in respect of a life insurance policy, other than a policy referred to in paragraph (a) or (b), the greater of (i) the amount determined by the formula A – B where A is (A) if the policy is issued after 2016 and is not an annuity contract, the cash surrender value of the policy at that time determined without reference to surrender charges, and (B) in any other case, the cash surrender value of the policy at that time, and B is the total of all amounts each of which is an amount payable at that time in respect of a policy loan in respect of the policy, and (ii) the amount determined by the formula A – (B + C) where A is (A) if the policy is issued after 2016 and is not an annuity contract, the net premium reserve in respect of the policy at that time, and (B) in any other case, the present value at that time of the future benefits provided by the policy, B is (A) if the policy is issued after 2016 and is not an annuity contract, nil, and (B) in any other case, the present value at that time of any future modified net premiums in respect of the policy, and C is the total of all amounts each of which is an amount payable at that time in respect of a policy loan in respect of the policy; (c.1) in respect of a group life insurance policy, the amount (other than an amount in respect of which a deduction may be claimed by the insurer under subsection 140(1) of the Act because of subparagraph 138(3)(a)(v) of the Act in computing the insurer’s income for its taxation year that includes that time) in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy that will be used by the insurer to reduce or eliminate a future adverse claims experience under the policy or that will be paid or unconditionally credited to the policyholder by the insurer or applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer, which is the least of (i) a reasonable amount in respect of such a dividend, refund of premiums or refund of premium deposits, (ii) 25% of the amount of the premium payable under the terms of the policy for the 12-month period ending at that time, and (iii) the amount of the reserve or liability in respect of such a dividend, refund of premiums or refund of premium deposits that (A) if the insurer is required to file an annual report with its relevant authority for a period that includes that time, is used in preparing that report, and (B) in any other case, is used in preparing its annual financial statements for the period that includes that time; and (d) in respect of a policy, other than a policy referred to in paragraph (a), in respect of a benefit, risk or guarantee that is (i) an accidental death benefit, (ii) a disability benefit, (iii) an additional risk as a result of insuring a substandard life, (iv) an additional risk in respect of the conversion of a term policy or the conversion of the benefits under a group policy into another policy after that time, (v) an additional risk under a settlement option, (vi) a