Income Tax Act — I-3.3 148
le out of the segregated fund. Partial surrender — ACB prorated (4) If a taxpayer disposes (other than because of paragraph (2)(a) or as described in paragraph (b) of the definition disposition in subsection (9)) of a part of the taxpayer’s interest in a life insurance policy (other than an annuity contract) last acquired after December 1, 1982 or an annuity contract, the adjusted cost basis to the taxpayer, immediately before the disposition, of the part is the amount determined by the formula A × B/C where A is the adjusted cost basis to the taxpayer of the taxpayer’s interest immediately before the disposition, B is the proceeds of the disposition, and C is (a) if the policy is a policy (other than an annuity contract) issued after 2016, the amount determined by the formula D – E where D is the interest’s cash surrender value immediately before the disposition, and E is the total of all amounts each of which is an amount payable, immediately before the disposition, by the taxpayer in respect of a policy loan in respect of the policy, and (b) in any other case, the accumulating fund with respect to the taxpayer’s interest, as determined in prescribed manner, immediately before the disposition. Repayment of policy loan on partial surrender (4.01) For the purposes of the definition adjusted cost basis in subsection (9) and paragraph 60(s), a particular amount is deemed to be a repayment made immediately before a particular time by a taxpayer in respect of a policy loan in respect of a life insurance policy if (a) the policy is issued after 2016; (b) the taxpayer disposes of a part of the taxpayer’s interest in the policy at the particular time; (c) paragraph (a) of the definition proceeds of the disposition in subsection (9) applies to determine the proceeds of the disposition of the interest; (d) the particular amount is not (i) otherwise a repayment by the taxpayer in respect of the policy loan, and (ii) described in subparagraph (i) of the description of C in paragraph (a) of the definition proceeds of the disposition in subsection (9); and (e) the amount payable by the taxpayer in respect of the policy loan is reduced by the particular amount as a consequence of the disposition. 10/8 policy surrender (5) If a policyholder has after March 20, 2013 and before April 2014 disposed of an interest in a 10/8 policy because of a partial or complete surrender of the policy, the policyholder may deduct in computing their income for the taxation year in which the disposition occurs an amount that does not exceed the least of (a) the portion of an amount, included under subsection (1) in computing their income for the year in respect of the disposition, that is attributable to an investment account described in paragraph (b) of the definition 10/8 policy in subsection 248(1) in respect of the policy, (b) the total of all amounts each of which is an amount, to the extent that the amount has not otherwise been included in determining an amount under this paragraph, of a payment made after March 20, 2013 and before April 2014 that reduces the amount outstanding of a borrowing or policy loan, as the case may be, described in paragraph (a) of the definition 10/8 policy in subsection 248(1) in respect of the policy, and (c) the total of all amounts each of which is an amount, to the extent that the amount has not otherwise been included in determining an amount under this paragraph, that the policyholder is entitled to receive as a result of the disposition and that is paid after March 20, 2013 and before April 2014 out of an investment account described in paragraph (b) of the definition 10/8 policy in subsection 248(1) in respect of the policy. Proceeds receivable as annuity (6) Where, under the terms of a life insurance policy (other than an annuity contract) last acquired before December 2, 1982, a policyholder became entitled to receive from the insurer at any time before the death of the person whose life was insured thereunder, all t