Coraline owns a $250,000 whole life insurance policy. She purchased the policy last year and does not have any funds accumulated in her cash…

When a life insurance policy is donated to a registered charity, the value of the donation for tax purposes is the policy's fair market value (FMV) at the time of the gift. According to the Canada Revenue Agency (CRA), the FMV is typically the cash surrender value (CSV). In this case, the policy was purchased last year and has a stated CSV of $0. Therefore, the value of the donation Coraline made this year by assigning the policy is $0. The monthly premiums she continues to pay will be considered separate charitable donations in the years they are paid, and she will receive tax receipts for those amounts in the future.

B. $200: This is a single premium payment. Premiums paid after the policy is assigned are considered donations in the year they are paid, not at the time of assignment.
C. $2,400: This represents the annual premiums. Premiums paid before the assignment are not charitable donations; they are the cost of maintaining the policy for her own benefit.
D. $250,000: This is the policy's death benefit, which is payable in the future. The donation value is based on the policy's current fair market value, not the future payout.

1. Canada Revenue Agency (CRA). Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

Paragraph 1.118: States that when a life insurance policy is donated, "the fair market value (FMV) of the policy is the amount that the donor would be entitled to receive on surrender of the policy." This directly supports that the donation value is the CSV, which is $0 in this scenario.

Paragraph 1.121: Clarifies that "Any premiums on the policy paid by the donor after the policy has been donated will be gifts of cash to the qualified donee." This confirms that future premiums are separate donations.

2. IFSE Institute. Life Insurance Course (LLQP).

Module: Taxation of Life Insurance Products, Section: Charitable Giving. This section details that the donation receipt for the transfer of a life insurance policy is based on its fair market value at the time of the transfer, which is generally its cash surrender value, not its face amount.