1 October 1998 External T.I. 9825135 - DAMAGES, NEGLIGENT ADVICE

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:

Would an amount paid, by the Superannuation Directorate for damages as a result of misinformation causing financial loss, to buy an annuity for the benefit of the claimant be taxable?

Position: No

Reasons:

We have previously ruled that damages for injury caused by negligence is non-taxable.

Linda Belliveau
Statutory Interpretation Section 982513
Superannuation M.P. Sarazin

October 1, 1998

Dear Ms. Belliveau:

Re: XXXXXXXXXX - Crown Liability Payment

This is in reply to your facsimile addressed to Ed Williams dated September 24, 1998, wherein you requested our views as to whether a certain payment would be considered taxable in the hands of the recipient.

XXXXXXXXXX

Comments

It appears that the interpretation you seek relates to proposed transactions to be undertaken by specific taxpayers and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. However, we are able to provide you with the following general comments.

We have previously concluded that amounts paid as damages by a pension plan administrator for misinformation causing financial loss to a member of the pension plan would not be taxable to the recipient. Consequently, this same position would apply where a member’s claim for damages resulting from misinformation causing financial loss is settled through the acquisition of a life annuity for the benefit of the member.

We trust the above comment will be of assistance to you.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c.: Ed Williams
Individual Returns and Payments
Processing Directorate