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.
Principal Issues: Whether compensatory awards are taxable.
Position: The portion of the award that is to compensate for lost wages is not taxable as the taxpayer was never an employee of the payor and the portion relating to damages arising from human rights violation is not taxable.
Reasons: The definition of "retiring allowance" in subsection 248(1) of the Income Tax Act (the "Act") includes an amount received in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal. Since the taxpayer was never an employee of the payor it cannot be said that the damages arose on the loss of employment.
To the extent that damages which are awarded by a human rights tribunal, or are a settlement in lieu thereof, do not relate to the loss of employment but relate solely to damages arising from human rights violation, such damages are not required to be included in income. Accordingly, a $10,000 award for injury to dignity received pursuant to S. 37(2)(d)(iii) of the Human Rights Code is non-taxable damages.
2005-012691b
XXXXXXXXXX Charles Rafuse
613-957-8967
August 19, 2005
Dear XXXXXXXXXX:
Re: Compensatory Awards
This is in reply to your August 10, 2005 telephone conversation with Mr. Phil Jolie, Director, Business and Partnerships Division, concerning our previous letter of
May 19, 2005, indicating that a portion of the damages that you received from the decision in your case against XXXXXXXXXX before the XXXXXXXXXX (the Tribunal) were taxable.
On further review of the documents that you provided it is noted that you were never an employee of XXXXXXXXXX and the damages you received were therefore not in respect of a loss of employment. Accordingly, it is now our opinion that the damages that you received are not taxable.
We trust this information is helpful.
Yours truly,
Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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