23 December 1994 External T.I. 9426755 - REIMBURSEMENTS OF SALARY OR WLRP PAYMENTS

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:

Tax deductibility of repayments of wage loss replacement plan benefits previously included in income pursuant to 6(1)(f) of the Act.

Position TAKEN:

Deductible in year reimbursed pursuant to 8(1)(n) subject to the limitations therein.

Reasons FOR POSITION TAKEN:

Legislation. Previous correspondence.

							942675
XXXXXXXXXX						D. Zion

Attention: XXXXXXXXXX

December 23, 1994

Dear Sirs:

Re: Repayment of Wage Loss Replacement Plan Benefits

We are writing in response to your letter of October 12, 1994 regarding the deductibility of repayments of wage loss replacement plan benefits which have been included in income in a previous year pursuant to paragraph 6(1)(f) of the Income Tax Act (the "Act").

You have advised us that several of your clients have received worker's compensation awards which they are required to use to reimburse wage loss replacement plan benefits received and included in income in a previous year under paragraph 6(1)(f) of the Act. You comment that your clients have received conflicting information regarding the tax treatment of these repayments from various sources.

Pursuant to paragraph 8(1)(n) of the Act, a taxpayer may claim a deduction against income from an office or employment for any required reimbursement of amounts paid to the taxpayer for a period in which the taxpayer did not perform the duties of the office or employment. This deduction is available for the taxation year in which the reimbursement is made. The deduction would be limited to amounts paid to the taxpayer for the period in which the taxpayer did not perform the duties of the office or employment and which were included in computing the taxpayer's income from an office or employment. In addition, the amount reimbursed cannot exceed the total amount received by the taxpayer over that period.

Thus, where an individual must reimburse a wage loss replacement plan for benefits received in a previous year or years from the proceeds of a worker's compensation award, the individual may claim a deduction pursuant to paragraph 8(1)(n) of the Act in the year the reimbursement is made. In some instances this deduction may result in a non-capital loss which, depending on the individual's circumstances, could be carried back or forward upon application by the taxpayer.

We would like to bring your attention to the comments contained in Line 229 of the 1993 T1 Guide rather than to Line 232 to which you refer in your letter. Line 229 states that "You can deduct salary or wages you have already reported as income and which you paid back in 1993. This includes amounts you repaid for a period in which you were entitled to receive wage-loss replacement benefits. Attach receipts or other documents showing these amounts." The T1 Guide also outlines the procedure to request a carry-back or carry-forward of a non-capital loss.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch