
Key Takeaways
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Premium payments as benefits: When one company pays premiums on a policy owned by another, courts treat it as a taxable benefit — intent does not override structure.
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Expanding reach of s. 246(1): CRA applied subsection 246(1) to a non-shareholder holding company, reinforcing its broad interpretation of “any economic benefit.”
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Scrutiny on life insurance structures: Courts focus on payment mechanics, not business purpose. Arrangements that show benefit without structural balance attract challenge.
The Situation
Marc-André Roy, majority shareholder of R3D Conseil Inc. ("R3D"), held shares through two holding companies. The Holdcos purchased life insurance to fund a buy-sell agreement, with R3D named as the revocable beneficiary. R3D, however, paid the policy premiums over a four-year period.
CRA assessed a taxable benefit under subsection 15(1) for the shareholder Holdco and under subsection 246(1) for the non-shareholder Holdco. The Federal Court of Appeal upheld both assessments, finding that an economic benefit had been conferred, regardless of the business purpose.
What Made the Difference
The FCA focused on alignment of form and payment: R3D paid, the Holdcos owned, and the insurance benefits accrued. That structure produced a taxable benefit under both provisions. The Court was unmoved by the argument that the arrangement served a legitimate business succession purpose. The reach of subsection 246(1) was also affirmed; its breadth allows the CRA to frame a benefit wherever economic value shifts, even without a direct shareholder relationship.
The Signal for Business Leaders
Corporate-owned life insurance disputes illustrate a recurring pattern: when premiums flow one way and ownership another, the CRA frames the gap as a taxable benefit. Courts often accept that framing, but not always. Outcomes shift when counsel credibly contests whether an “economic benefit” has truly been conferred.
The broader signal is that structure matters, but so does the judgment applied to its interpretation. Defensible resolutions emerge not only from how arrangements are constructed, but also from how they are tested and framed when challenged.
Case reference: Gestion M.-A. Roy Inc. v. Canada, 2024 FCA 16