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:
Whether an amount received form XXXXXXXXXX in settlement of complaint filed with the Canadian Human Rights Commission, is a qualifying amount under subsection 110.2(1) of the Act.
Position:
The facts of this case support that conclusion.
Reasons:
Subsection 110.2(1).
February 12, 2002
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter of November 30, 2001, addressed to her predecessor, the Honourable Martin Cauchon, concerning the income tax treatment of a lump-sum amount you received in XXXXXXXXXX.
I am acknowledging receipt of the additional information that you submitted on January 10, 2002. As well, with your approval, the Canada Customs and Revenue Agency(CCRA) obtained additional information from senior officials of XXXXXXXXXX.
The payment arose as a result of a settlement of your complaint against your former employer, XXXXXXXXXX, which you had brought before the Canadian Human Rights Commission (CHRC). The Income Tax Act has a special tax calculation for individuals who receive certain qualifying retroactive lump-sum amounts in a taxation year that relate to a preceding taxation year. One such retroactive lump-sum payment is an amount received by an individual pursuant to a contract in which the individual and the payor terminate a legal proceeding. The interest portion of the lump-sum amount is taxable in the year received, and is not eligible for the special tax calculation.
I note that the proceeding you brought before the CHRC was authorized under the Canadian Human Rights Act. As a result of a decision in another case that was similar to your situation, the CHRC recommended to XXXXXXXXXX to settle your case. Through this process, you obtained a binding settlement to receive an amount that was approved by the CHRC, thereby ending your case. Therefore, based on the information received, the CCRA is of the view that the amount received in settlement of your case, is a qualifying amount for the purposes of the special tax calculation.
It is XXXXXXXXXX responsibility to provide you with the T1198, Statement of Qualifying Retroactive Lump-Sum Payment, which you must file with your tax return for XXXXXXXXXX. The CCRA is not aware of any reason that would preclude you from getting this form from your former employer. The form should indicate which taxation years your lump-sum amount covers. It will then enable the CCRA to determine if the special tax calculation is beneficial to you.
I understand that there is some question as to which taxation years are covered by the lump-sum payment you received. Since the amount was intended to compensate you for lost wages for a specified period commencing on your date of mandatory retirement on XXXXXXXXXX, an allocation based on the number of days in each taxation year within this period would be reasonable in the circumstances.
I trust the information provided is helpful.
Yours sincerely,
Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch
Randy Hewlett
957-8973
2001-011570 & 2002-011765
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