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Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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If we cash-out a life insurance policy issued in Canada, and

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If we cash-out a life insurance policy issued in Canada, and we decide to bring the cash to the US (approx 20,000 CDN....19,000 US) what would the tax implications be? Note: The Canadian gains on the policy would be approx 8,000 and a tax of approx 1750.00 would be paid to Canada Revenue as per "Disposition of a Life Insurance Policy in Canada by a Non-Resident of Canada" Thank You

If you are an US person - the gain will be your taxable income.

If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income.


Because the same income is also taxable in Canada you may claim a credit for taxes paid abroad on your US tax return.

To determine the amount of credit -the person should use the form 1116 and attach it to his/her tax return. -

Here are instructions -


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