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:
The tax treatment of an award of damages for personal injury (vehicle accident).
Position TAKEN:
Amounts received by a taxpayer as special or general damages for personal injury are excluded from income and, as a result, are not subject to income tax, regardless of the fact that the amount of such damages may have been determined with reference to the loss of earnings of the taxpayer in respect of whom the damages were awarded.
Reasons FOR POSITION TAKEN:
Paragraph 2 of IT-365R2.
XXXXXXXXXX 5-993254
M. Azzi
Attention: XXXXXXXXXX
January 10, 2000
Dear Sirs:
Re: Damages for Personal Injury
This is in reply to your letter of December 13, 1999, wherein you requested our views on the tax treatment of an award of damages for personal injury.
We understand that a Canadian resident will receive the award in a personal injury case (vehicle accident) filed in the U.S. You indicate that the award will replace wages lost due to the injury.
Written confirmation of the tax implications inherent in particular transactions is given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3 (copy enclosed), dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant tax services office. While the determination of the tax treatment of amounts to be paid in a particular situation requires a review of all relevant facts and documentation, we are prepared to offer the following general comments.
The Canada Customs and Revenue Agency's general position on amounts received as damages in respect of personal injury is set out in Interpretation Bulletin IT-365R2, Damages, Settlements and Similar Receipts. We have enclosed a copy of the bulletin
for your information. As indicated in paragraph 2 of IT-365R2, amounts received by a taxpayer as special or general damages for personal injury are excluded from income and, as a result, are not subject to income tax, regardless of the fact that the amount of such damages may have been determined with reference to the loss of earnings of the taxpayer in respect of whom the damages were awarded.
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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