Béliveau – Tax Court of Canada finds that insurance benefits received by an ill dental surgeon to cover her practice expenses were taxable receipts
The taxpayer, a self-employed dental surgeon, received benefits totalling over $600,000 under three Great-West policies during a two-year period of illness. Two of the policies provided coverage for her monthly general professional expenses, and the third policy, styled as professional sickness insurance, provided monthly amounts in the event of her illness. The taxpayer considered that there was no significant distinction between the third policy (replacing lost income) and the first two policies (covering business expenses). In affirming the Minister’s assessment, which treated the amounts paid out to the taxpayer under the first two policies as s. 9 income, Favreau J stated:
The surrogatum principle … is applicable [under which] the tax treatment of sickness insurance benefits depends on what such benefits are intended to replace being, in this case, the general expenses of carrying on the dental clinic.
He went on to indicate that the premiums under the two policies (which the taxpayer had not deducted in computing her income) were deductible.