Date: 19980505
Docket: 97-2970-IT-I
BETWEEN:
RONALD G. SMITH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Teskey, J.T.C.C.
[1] The Appellant in his Notice of Appeal therein, appealed his reassessment of income tax for the years 1994, 1995 and 1996, and elected the informal procedure.
Issue
[2] The issue before me is whether amounts paid by the Appellant's former employer, Ball Packaging Products of Canada ("Ball") in respect of group term life insurance premiums are to be included in computing the Appellant's taxable income.
[3] At the conclusion of the hearing, for reasons given then, I advised the Appellant that his 1994 and 1995 appeals would be dismissed for reasons given in argument by the Respondent and upon relying on the decision of my late colleague Sobier, J. in Beare v. M.N.R., 91 DTC 411.
[4] The 1996 appeal was adjourned to allow the Appellant to file with me a letter from Ball with regards to the increase in the 1996 amount over the 1995 amount, in the sum of $431.95. The Appellant supplied the Court with a letter from Ball. The pertinent part reads:
Survivor Income Benefit (SIB)
Under the terms of the Group Insurance Plan for the Simcoe plant, should you pass away before your spouse, she will be eligible for a monthly SIB in the amount of $150. This is a benefit for which the company pays a monthly premium to the Maritime Life Insurance Company and is, under Revenue Canada rules, considered a taxable benefit. It is not, nor has it ever been, a benefit which is payable as part of any pension plan. As you know, the Simcoe Hourly Pension Plan was wound up upon the plant's closure.
I have enclosed a copy of the Index Section from the Labour Agreement which clearly shows the Survivor Income Benefit as a benefit included under the Group Insurance Plan.
The monthly premium is $22.22 plus Provincial Sales Tax for each $100 of coverage.
1.5 X $22.22 X 12 mths X 1.08 $431.95
The amount shown in Box 28 of your 1996 T4A, which must be included with your 1996 tax return, is a combination of the annual Life Insurance premium at $971.38 and the annual SIB premium at $431.95 for a total taxable benefit of $1,403.33.
[5] I am satisfied that the amount of $431.95, paid during 1996 in respect of survivor income benefits is an amount that is included in income pursuant to subsection 6(4) of the Income Tax Act (the "Act"). The amount is clearly funding a pension.
[6] The regulation amending the Income Tax Regulation SOR/97-494 requires that premiums paid in respect of survivor income benefit be included in calculating the prescribed benefit of the group life insurance benefit for the purposes of subsection 6(4) of the Act.
[7] Section 2702 of the Income Tax Regulations (the "Regulations") outlines the calculation of the term insurance benefit which by virtue of section 2701 of the Regulations is a component of the prescribed benefit, which must be included in income pursuant to subsection 6(4) of the Act. Subsection 2702(3) of the Regulations expressly provides a means of calculating the amount of term insurance on a person's life, for the purposes of calculating the term insurance benefit where the proceeds of the insurance are payable only in the form of periodic payments. The form of payment, namely periodically, is expressly contemplated by the legislation and are the amounts in respect of group term insurance.
[8] The amount of $431.95 was not premium in respect of a pension plan, it is in respect of group term life insurance.
[9] For these reasons, the appeal for the year 1996 is also dismissed.
Signed at Ottawa, Canada, this 5th day of May, 1998.
"Gordon Teskey"
J.T.C.C.