Fully taxable after cancellation

Hello, I desperately need help! My parents just cancelled Ivari universal life plan and just received cash surrender value last week. I wanted to make sure there would not be any tax issues but no one replied and meanwhile surrender process went on. But one day after deposit, I finally received an email about my tax inquiry and it says due to negative ACB, it's fully taxable. I don't get it. Does it mean that insurance charges and policy fee decreased entire premiums (about 50000) to zero base and the cash surrender value is purely capital gain from investments? So this is why it's fully taxable? Is there any way I can dispute before filing t5 next year? This is the worst of worst that I can think of.