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 an moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Does paragraph 81(1)(g. 1) apply to certain awards paid out under the Victims of Crime Act and the Multi-Provincial/Territorial Assistance Program Agreement?
Position TAKEN:
No.
Reasons FOR POSITION TAREN:
The awards are not in respect of damages for personal injuries of the child.
5-991734
5-991735
J. Wilson
Attention: XXXXXXXXXX
August 5, 1999
Dear Sirs:
Re: Personal Injury Awards
This is in reply to your letter of June 15, 1999, regarding personal injury awards. You attached copies of two other letters, dated January 5 and 18, 1999, addressed to the Edmonton Tax Services Office. You indicate that you did not receive a response to either of these letters.
In the January 5th letter, you have asked whether the income on an award for the loss of a parent, payable under the Victims of Crime Act ("VCA'), would be exempt from income pursuant to paragraph 81 (1)(g. 1) of the Income Tax Act (the "Act"). You indicate that the award was for personal injuries due to the emotional loss of the parent. In the January 18th letter, you have referred to the Multi-Provincial/Territorial Assistance Program Agreement (the "Agreement") covering payouts for blood transfusions. The awards to both parents and their children are non-taxable. In this respect, you again have asked whether the income on an award paid under the Agreement for the personal injuries suffered by a child due to the emotional trauma of losing a parent would be exempt from income pursuant to paragraph 81(1)(g. 1) of the Act.
Under paragraph 81(1)(g.1) of the Act, an individual can exclude income derived from certain sources for taxation years during any part of which the individual was under 21 years of age. However, to qualify for the exemption, the income must, during the particular taxation years, be derived from property received by or on behalf of an individual who is under 21 years of age as an award of; or pursuant to an action for, damages in respect of the individual's physical or mental injury. Accordingly, where an award is paid to an individual under the age of 21 as compensation for his or her own personal iniuries arising as a consequence of the emotional trauma suffered due to the loss of a parent, then the provisions of paragraph 81(1)(g. 1) of the Act will apply.
With respect to the VCA, upon review of the documents provided to us, there is not enough information to determine if the financial benefits described in section 12(1)(b) of the VCA were intended to be ex gratia payments by the governments to provide a dependant of a deceased victim with financial assistance or an amount in respect of damages for mental injuries suffered by a dependant of the victim. We would require more information from the organization administering the VCA before a determination of the application of paragraph 81(1)(g. 1) of the Act could be made. However, for greater certainty, any payments made to the dependant of a deceased victim in accordance with section 12(1)(b) of the VCA would be non-taxable.
With respect to the Agreement, the opening paragraphs state that the "Province wishes to provide assistance to the spouse and the dependants of the direct recipient". Section 2 of the Agreement, entitled "Survivor Benefits", does not indicate that any of the compensation to be paid to a surviving spouse or other dependant is on account of damages for personal injuries suffered by the surviving spouse or other dependants. The payments appear to be, arguably, either in the nature of ex gratia payments by the provincial/territorial government to provide financial assistance to the dependants of the blood transfusion victims or payments in lieu of damages suffered by the deceased person. Therefore, based on the information provided, we are not able to conclude that an amount received by a family member pursuant to section 2 of the Agreement is an award of damages in respect of the family member's mental injury (e.g. mental trauma due to loss of care, companionship and guidance). Without further evidence to the contrary, we are of the view that paragraph 81(1)(g. 1) of the Act would not be applicable. Again, however, for greater certainty, any payments made to a family member of a deceased person in accordance with section 2 of the Agreement would be non-taxable.
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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