CRA indicates that damages can be eligible for a s. 216 election

Consistently with the surrogatum principle (or the broad meaning of "in lieu of" per Transocean), CRA found that annual compensation paid pursuant to a court order by a Canadian utility to a non-resident lessor, to compensate the lessor for lost rental income resulting from the utility’s construction of power lines on the rented lands, should be treated for Part XIII purposes as rent (subject to 25% withholding). However, CRA indicted that, by the same token, the compensation amounts also would be eligible for the s. 216 election (to effectively subject the amounts to Part I tax instead) provided that the usual tests (e.g., the lost rental income was property income) were satisfied.

Neal Armstrong. Summaries of 13 February 2017 External T.I. 2015-0570011E5 under s. 212(1)(d) and s. 216(1).