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:
Can a survivor of an estate that has no dependants that makes a claim against a provincial fund established for survivors of a fatality able to receive the amounts as a structured settlement?
Position TAKEN: Question of fact
Reasons FOR POSITION TAKEN:
Would require review of all pertinent documents and agreements.
2003-000917
XXXXXXXXXX C. Tremblay, CMA
(613) 957-2139
April 9, 2003
Dear XXXXXXXXXX:
Re: Structured Settlement
This is in reply to your letter of March 18, 2003, regarding the use of a structured settlement in a specific situation. You advise us that up to November 1, 2002 in the Province of Alberta, the survivors of a fatality (i.e. a relative of the deceased) and the estate of the fatality could make a claim for damages against a tort feasor even though the estate has no dependents. The claim is made for future economic loss that the deceased could have reasonably expected to earn.
In accordance to paragraph 5 of Interpretation Bulletin IT-365R2, Damages, Settlements and Similar Receipts, a structured settlement is a means of paying or settling a claim for damages, usually against a casualty insurer, in such a way that amounts paid to the claimant as a result of the settlement are free from tax in the claimant's hands. To create such a structured settlement, certain conditions must be complied with. One of these is that a claim for damages must have been made in respect of personal injury or death. Generally all amounts that qualify as damages for personal injury or death will be eligible for a structured settlement other than where personal injury or death claims are for amounts owing under contractual agreements. Amounts calculated with reference to future potential economic loss could also qualify for a structured settlement if the payments represent non-taxable receipts for damages.
A determination of whether periodic payments made to a plaintiff are non-taxable by virtue of the general position in paragraph 5 of IT-365R2 can only be made following a review of all the relevant facts and documentation including the claim and the settlement agreement. We are prepared to consider a specific fact situation involving a proposed transaction on an advance income tax rulings basis. The procedures for submitting an advance income tax ruling are set out in Information Circular 70-6R5.
We hope that our comments are of assistance, but would caution you that they do not constitute an advance income tax ruling, and accordingly, are not binding on the CCRA with respect to any particular transaction.
Yours truly,
Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
Legislation and Policy Branch
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