Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Ruling request with respect to damage payment for personal injury.
Position:
No ruling provided. Cannot support that the payments are tax-free.
Reasons:
Representative was asked to provide further substantiation that the damage payment is not taxable. In our view the payment is as a result of a loss of employment and that a retiring allowance is the appropriate result in the circumstances. The individual involved did not submit further information.
XXXXXXXXXX 2001-010532
C. Tremblay, CMA
February 12, 2002
Dear XXXXXXXXXX:
Re: XXXXXXXXXX - Advance Income Tax Ruling Request
This is in reply to your letters of October 10 and November 29, 2001, and further to our telephone conversations of December 5, 2001 (XXXXXXXXXX/Tremblay) and December 11, 2001(XXXXXXXXXX/Tremblay) in respect of the above noted ruling request.
Generally, damages, such as those received for lost (unearned) wages or employee benefits, are taxable under subsection 5(1) of the Income Tax Act (the "Act") or paragraph 6(1)(a) of the Act if the employee retains his or her employment or is reinstated or under paragraph 56(1)(a) of the Act as a retiring allowance if the employee loses his or her office or employment. Further, it is our view that, for example, amounts received as compensation for damages to health, extended pain, and mental distress suffered by an individual as a result of the loss of his or her employment are taxed as a retiring allowance.
Since you and/or XXXXXXXXXX have been unable to supply us with documentation that would support that the proposed payments, in XXXXXXXXXX situation, are a tax-free damage award and not a taxable benefit as described above, we are now closing our file.
Yours truly
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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