Form T1135 - Life Insurance cost

[Taxgeek]

I have a technical question: i have life insurance with my US employer, and not sure what to put in the "max cost amount during the year" and "cost amount at year end" fields in form T1135. Is it the total amount of premiums paid by the employer for my life insurance, or the face value of the policy (e.g. 2 x annual salary)? Or something else?

Any hint by anyone reading this, greatly appreciated.

[Curmudgeon]

From the CRA:

Does a life insurance policy issued by a foreign issuer meet the definition of specified foreign property? If yes, how is the cost amount of a foreign insurance policy determined?

Yes, a life insurance policy issued by a foreign issuer meets the definition of specified foreign property. The adjusted cost basis of an interest in a life insurance policy is defined in subsection 148(9) of the Income Tax Act. This amount can be considered as a reasonable approximation of the cost amount of the property for the purpose of Form T1135.

Then read this:

https://www.advisor.ca/tax/tax-news/beware-these-t1135-traps/

Good luck!

[Taxgeek]

Thanks Curmudgeon. I went through the relevant tax act sections, mainly 148 (1) to (9), and it's a total doozie.

I was hoping someone had a quick way to do it for a first year US company employee, between July and December, 2021, who has life insurance offered by the employer as part of the benefits. Tempted to not report or if i do, just report the premiums paid (~200USD), as i must assume the NCPI (net cost of pure insurance) is close to zero, based on a (practically) zero mortality rate for a young person.

[Curmudgeon]

Remember if you don't have > $100k acb of foreign investment, the T1135 isn't required. If the insurance is term insurance, then the NCPI would be zero since term is pure insurance. If you are allowed to borrow on the policy, the maximum amount would be an estimate of the NCPI.