I have a T1 where during 2020 the Taxpayer repaid a Life Insurance Policy Loan and has confirmation that they can claim the repayment as a deduction in the current year.
This deduction exceeds Total income by $50,000.
Should this not create a non-capital loss of $50,000?
I did see several years ago where a customer borrowed from his life insurance policy and was issued a T5 for other income. I checked with the issuers and was told it was taxable. period. Seems to me if you pay it back, there should be a deduction
If memory serves me correct this applies to a Whole Life or Permanent Policy. When you borrow against the cash value in a policy you are borrowing from the internal investment growth which has not been taxed until you take it out. If that money is paid out due to death it is part of the insurance and non-taxable. I would suggest contacting the Life Insurance company.