27 June 2003 External T.I. 2002-0176265 - Holocaust victim assets litigation

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: Will payments from the settlement by Swiss Banks under the Holocaust Victim Assets Litigation (Deposited Asset Class) be taxable in Canada?

Position: We are unable to say, although, our understanding is that in tax policy terms, these amounts ought not to be included in income under the Act.

Reasons: Each case will depend on its facts, and will have to be looked at individually.

XXXXXXXXXX 2002-017626
S. E. Thomson
June 27, 2003

Dear XXXXXXXXXX:

Re: Holocaust Victim Assets Litigation Settlement Agreement

This is in reply to your email to Carl Desmarais of the Office of the Minister of National Revenue on or about November 4, 2002, which was forwarded to us for reply. We apologize for the delay in responding. You inquire on behalf of a family who has received, or will receive, an amount under the above Agreement, in the Deposited Assets Class. You would like to know if the amount is taxable in Canada.

As we understand it, the facts of the situation are as follows:

In 1996 and 1997, several class action lawsuits were filed in the United States District Court for the Eastern District of New York against certain Swiss banks, on behalf of victims of Nazi persecution, alleging that the Swiss banks knowingly retained and concealed assets of Holocaust victims and collaborated with and aided the Nazi Regime by accepting and laundering illegally obtained Nazi loot and profits of slave labour.

In August 1998, the parties reached an agreement in principle to settle the lawsuits for US$1.25 billion. The settlement agreement became final on March 30, 1999. In exchange for the $1.25 billion payment, the plaintiffs and class members agreed to release, or waive all future legal claims against the defendant Swiss banks, as well as virtually all Swiss business and governmental entities. The $1.25 billion settlement was to be distributed among five categories.

One of those categories (which is the subject of your email) is the Deposited Assets Class. Included in this category are those who had deposited money or other valuables in Swiss banks before or during the Holocaust, and who have never been repaid their deposits (or the heirs of such depositors). Up to US$800 million has been allocated for awards to claimants under this category. The amount of an individual award is based upon the amount in the account as established by bank records, multiplied by a factor of approximately 12 to account for inflation and interest.

You would like to know if any portion of a payment made to claimants in the Deposited Assets Class who are residents of Canada will be included in their income for tax purposes.

OUR COMMENTS

Given the complex legal issues involved, including, for example, the ownership of a bank account, the existence and settlement of estates, etc. and the fact that we have not been asked to review the facts and documentation pertaining to a specific case, it is difficult to provide a definitive response that will prevail in every case. However, given the history of this matter, there are factors present that could lead to the conclusion that an amount received would represent a certain class of damages that is not taxable under the Income Tax Act. This would be in keeping with our understanding that, in tax policy terms, these payments ought not to be included in income under the Act. Should you have a specific case, or if you require further information related to this matter, we would be pleased to assist you.

We trust that our comments have been helpful.

Yours truly,

Olli Laurikainen, C.A., Manager
for Division Director
International & Trusts Division
Income Tax Rulings Directorate

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