[Music] we're now gonna continue with another example which applies to a deem disposition the previous Rhea example we had was an actual disposition you remember Brian in our example he actually surrendered his policy and so we went through that calculation and so this time we're gonna look at a deemed disposition again remember a deem disposition are those things that we can we do to a policy that Revenue Canada says it's just the same as if you had surrendered it we're gonna tax you on the same basis or we're gonna subject the TAT the policy to that check that income tax check to make sure that you whether you had or had again in many situations there is no gain and therefore no tax payable but nevertheless we have to go through the calculation so once again deem dispositions these are tax consequences even if there's no actual transfer of ownership or surrender of the policy so again if I take out cash and I take out more than I put in then I could have a tax liability I take out a policy loan receive a dividend from a participating policy policy becomes non-exempt or the policy holder dies and is not the life insured these are three party contracts we did touch on that on a previous segment so let's look at an example where someone is not going to surrender the policy but they're gonna take some money out of the policy they're gonna withdraw some money they still want to keep the plan going they just need some money and decided to withdraw it rather than take it out as a policy loan so in our example we have some insured of $250,000 the policy was purchased on November 15th year 2000 the customers put in premiums of 3,000 a year for 18 years for a total of $54,000 the current cash value of the plan is 38,000 in other words that's the amount that's sitting the clients account under his insurance policy he has received dividends of $9,000 over the years and the net cost of pure insurance is sixteen thousand dollars the client wants to withdraw thirty thousand dollars from his plan so he has thirty eight thousand dollars in there but he wants to just withdraw thirty thousand the question is is there going to be a tax liability on any of that thirty thousand dollars that he withdraws well we have to go through the calculation we have to look again the same formula we have to look at policy gain is it going to be the proceeds of disposition minus the adjusted cost base and so his proceeds of disposition thirty thousand dollars right which is what he is borrowing or sorry not boring which is what he's withdrawing he wants to take out thirty thousand dollars from the policy so that's what he's getting in his hands his adjusted cost base based on the last acquired date and this policy as you see above was bought after December 1st 1982 so it's one of the newer policies so it has a new ACB formula and so the ACB formula is going to be premiums paid minus dividends declared - the NCPI and we can see that the premiums paid fifty four thousand - nine thousand dollars of dividends - the NCPI of sixteen thousand for an adjusted cost base of twenty nine thousand dollars now the client takes out the thirty thousand dollars but his adjusted cost base is twenty nine thousand dollars therefore he has a taxable gain he must report one thousand dollars on his income tax for the year that he took that partial withdrawal so again the same process you go through same formula but you insert based on the data you have in the example you can you can go through that process and calculate whether the client has got any tax liability for example if his policy gain if in fact it was switched around let's say he was taking out $29,000 but his adjusted cost base was thirty thousand he would have a tax loss he would not have to pay any tax because he has not gotten back out any more than he put into the plan [Music]