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 Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: prejudgment interest on a retroactive award of salary awarded concurrently with reinstatement
Position TAKEN: taxable
Reasons FOR POSITION TAKEN:
the position taken in the April 86 press release only applies to an award of damages. Where an individual is reinstated, there is no loss of employment & thus any amount awarded cannot be considered as damages from wrongful dismissal
February 27, 1995
Shawinigan-Sud Tax Centre Head Office
T1 Client Services Rulings Directorate
A. Humenuk
Attention: Mario Lafontaine (613) 957-8953
942668
Prejudgment interest
XXXXXXXXXX
We are writing to advise you that the above-noted taxpayer has withdrawn his request for an opinion on the prejudgment interest awarded to him by his former employer. He had requested that we confirm that the interest he received was not required to be included in income on the basis of previous opinions we had offered concerning prejudgment interest awarded in respect of wrongful dismissal.
Based on the documentation you forwarded to us on January 18, 1995, we note that XXXXXXXXXX was reinstated on XXXXXXXXXX and that the payment in question is compensation for wages that he would have received in the intervening period between the wrongful dismissal and his reinstatement.
XXXXXXXXXX
In cases of reinstatement of employment on a retroactive basis, the amounts received in settlement of the forgone salary, wages or other benefits are to be treated as income from employment rather than a retiring allowance. This position is consistent with the decision rendered in Gagnon v. M.N.R. (61 DTC 307). This position would also be applicable where reinstatement was awarded but the individual did not return to work for his/her former employer.
Since XXXXXXXXXX was reinstated, the commentary upon which he based his request is not applicable to his situation. It is the Department's position that any interest calculated on wages or salary owed to an employee, including an amount of pre-judgement interest, is taxable as interest in the year in which it is received or receivable pursuant to paragraph 12(1)(c) of the Income Tax Act.
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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