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 the income on amounts paid under a settlement reached on behalf of children under 21 years in respect of loss of consortium, society and companionship arising from the death of a parent are payments for a "mental injury" within the meaning of paragraph 81(1)(g.1)?
Position: No.
Reasons: While the relevant statute that provides for recovery for "the reasonable value of the services, consortium, companionship, comfort, instruction, guidance, counsel, training, and support", it precludes recovery for "damages for grief and bereavement by reason of the death".
Denise Dalphy, LL.B.
XXXXXXXXXX 2002-012492
(613) 941-1722
June 12, 2002
Dear XXXXXXXXXX:
Re: Paragraph 81(1)(g.1) of the Income Tax Act (the "Act")
This is in reply to your letter dated February 20, 2002 wherein you asked us to confirm that any income earned on the Children's (defined below) settlement until they reach the age of 21 should not be taxable pursuant to paragraph 81(1)(g.1) of the Act.
Our understanding of the facts is as follows:
XXXXXXXXXX.
Written confirmation of the consequences inherent in particular transactions are given by the Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R4 (the "Circular"). Where the particular transactions are completed or partially completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following general comments:
Where a settlement is reached in the course of litigation relating to a statute that provides for recovery for "the reasonable value of the services, consortium, companionship, comfort, instruction, guidance, counsel, training, and support" and specifically precludes recovery for "damages for grief and bereavement by reason of the death", we would not consider the damages to have been awarded as "damages in respect of mental injury" and therefore paragraph 81(1)(g.1) of the Act will not apply.
We do not dispute that a child may suffer a mental injury as a result of losing a parent. However, it does not necessarily follow that because a child has suffered a mental injury after the loss of a parent and because damages were awarded to that child, that the award of damages was for a mental injury.
The foregoing comments represent an opinion expressing our general views with respect to the subject matter. As indicated in paragraph 22 of the Circular, the above comments do not constitute an advance income tax ruling and, accordingly, are not binding on the Canada Customs and Revenue Agency.
We trust our comments will be of assistance to you.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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