14 March 1995 Internal T.I. 9428867 - WORKERS COMP -TAXABILITY

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:

whether workers comp benefits will be tax free. Payments to be received under section 16 of Ontario's Workers' Compensation Act

Position TAKEN:

As dscussed in IT-202R2. Should compensation payment include an interest component from the date of entitlement to the date the award is made such interest is taxable as interest income

Reasons FOR POSITION TAKEN:

per 56(1)(v) and 110(1)(f)(ii) and IT-202R2

		March 14, 1995

	Ottawa Tax Centre		Rulings Directorate
			Sandra Short
	Attention:  Enquiries and Adjustment	(613) 957-2136
			942886

Workers Compensation Board payments

We are responding to an unsigned referral made by you on November 8, 1994 concerning a

XXXXXXXXXX

We trust that you or North York Tax Services will contact XXXXXXXXXX and forward our opinion on the subject of workers compensation to be received by him.

The enquiry sheet T196 advises that XXXXXXXXXX will receive payments under the non-economic loss provisions of the Workers Compensation Act of Ontario. We have assumed these to be payments received under section 42 of the Workers Compensation Act of Ontario which states that a worker who suffers permanent impairment as a result of an injury is entitled to receive compensation for non-economic loss in addition to any other benefit receivable under that Act. The enquiry sheet states that XXXXXXXXXX will receive these payments so that he will not sue the employer for damages and that the settlement may be in the form of periodic payments for life or a lump sum. The client is seeking assurance that any benefits will be received tax free.

The provisions of section 16 of Ontario's Workers' Compensation Act are in lieu of all rights and rights of action to which a worker is or may be entitled against the employer for or by reason of any accident happening to the worker while in the employment of the employer. As discussed in paragraph 3 of Interpretation Bulletin IT-202R2, the amount of compensation received under an employees' or workers' compensation law of Canada or a province in respect of an injury, disability or death in a taxation year by any person is, by virtue of paragraph 56(1)(v) of the Income Tax Act, required to be included in computing that person's income for the year. Any compensation which is included in the taxpayer's income under paragraph 56(1)(v) may, by virtue of subparagraph 110(1)(f)(ii) of the Act, be deducted in computing the taxpayer's taxable income for the year. Should XXXXXXXXXX compensation payment include an interest component from the date of entitlement to the date the award is made such interest will be taxable as interest income.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Policy and Legislation Branch