Since I had first posted the question I have been in contact with CRA and had gotten an answer to my question which basically aligns with your answer. The life insurance policy that I disposed of is treated as a capital gain and the life insurance company is required to withhold taxes on the amount of disposition. The amount they withhold fulfills my obligation so I do not need to file a tax return. If i feel that the amount they withheld is too much and feel I am entitled to a refund, then I can file a return under section 217. Since the amount of disposition wasn't that large and the amount of tax I payed is pretty minor, I decided that it wasn't worth my time or effort to file a tax return.
