Income Tax Act — I-3.3 139.1
ualization, the policyholder is deemed, as a consequence of the undertaking to reduce the premiums, to have received a benefit equal to the present value at the time of the demutualization of the additional premiums that would have been payable if the premiums had not been reduced in connection with the demutualization; (c) the payment of a policy dividend by an insurance corporation or an undertaking of an obligation by the corporation to pay a policy dividend is considered to be in connection with the demutualization of the corporation only to the extent that (i) the policy dividend is referred to in the demutualization proposal sent by the corporation to stakeholders, (ii) the obligation to make the payment is contingent on stakeholder approval for the demutualization, and (iii) the payment or undertaking cannot reasonably be considered to have been made or given, as the case may be, to ensure that policy dividends are not adversely affected by the demutualization; (d) except for the purposes of paragraphs (c), (e) and (f), where part of a policy dividend is a conversion benefit in respect of the demutualization of an insurance corporation and part of it is not, each part of the dividend is deemed to be a policy dividend that is separate from the other part; (e) a policy dividend includes an amount that is in lieu of payment of, or in satisfaction of, a policy dividend; (f) the payment of a policy dividend includes the application of the policy dividend to pay a premium under an insurance policy or to repay a policy loan; (g) where the demutualization of an insurance corporation is effected by the merger of the corporation with one or more other corporations to form one corporate entity, that entity is deemed to be the same corporation as, and a continuation of, the insurance corporation; (h) an insurance corporation shall be considered to have become a party to an insurance policy at the time that the insurance corporation becomes liable in respect of obligations of an insurer under the policy; and (i) notwithstanding paragraph 248(7)(a), where a cheque or other means of payment sent to an address is returned to the sender without being received by the addressee, it is deemed not to have been sent. Consequences of demutualization (4) Where a particular insurance corporation demutualizes, (a) each of the income, loss, capital gain and capital loss of a taxpayer, from the disposition, alteration or dilution of the taxpayer’s ownership rights in the particular corporation as a result of the demutualization, is deemed to be nil; (b) no amount paid or payable to a stakeholder in connection with the disposition, alteration or dilution of the stakeholder’s ownership rights in the particular corporation may be included in Class 14.1 of Schedule II to the Income Tax Regulations ; (c) no election may be made under subsection 85(1) or (2) in respect of ownership rights in the particular corporation; (d) where the consideration given by a person for a share of the capital stock of the particular corporation or a holding corporation in connection with the demutualization (or for particular ownership rights in a mutual holding corporation in respect of the particular corporation) includes the transfer, surrender, alteration or dilution of ownership rights in the particular corporation, the cost of the share (or the particular ownership rights) to the person is deemed to be nil; (e) where a holding corporation in connection with the demutualization acquires, in connection with the demutualization, a share of the capital stock of the particular corporation from the particular corporation and issues a share of its own capital stock to a stakeholder as consideration for the share of the capital stock of the particular corporation, the cost to the holding corporation of the share of the capital stock of the particular corporation is deemed to be nil; (f) where at any time a stakeholder receives a taxable conversion benefit and subsection (14