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: Pre-judgment interest - is it taxable?
Position TAKEN: Yes, other than personal injury or death,or retroactive WCB claims
Reasons FOR POSITION TAKEN 12(1)(c ) : 2003 CTF position effective January 1, 2004
2003-003802
XXXXXXXXXX C. Tremblay, CMA
(613) -957-2139
October 6, 2003
Dear XXXXXXXXXX,
This is in reply to your letter of August 20, 2003, in which you inquired whether pre-judgment interest would be considered taxable income in the year received.
Pre-judgment interest is generally taxable as interest income if it is in the nature of interest. In our view, all pre-judgment interest that has been explicitly identified by a court or by means of an out-of-court settlement will constitute interest income in the hands of the recipient for all purposes of the Income Tax Act. Effective January 1, 2004 only pre-judgment interest on non-taxable awards for personal injury or death, or retroactive worker's compensation claims will be non-taxable. Prior to January 1, 2004, pre-judgement interest on wrongful dismissal awards was also non-taxable.
We trust our comments are of assistance, however please note that this is not a ruling but an opinion and it is not binding on the Canada Customs and Revenue Agency.
Yours truly
Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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