11 September 2001 Ruling 2001-0089433 - RETIRING ALLOWANCE

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:

Ruling request with respect to damage payment for personal injury.

Position:

No ruling provided. We assumed they did not wish to proceed with the request

Reasons:

Representative was asked to provide further substantiation that the damage payment is not taxable. In our view the payment is as a result of a loss of employment and that a retiring allowance is the appropriate result in the circumstances. No reply was received and it was assumed the request was withdrawn.

XXXXXXXXXX 2001-008943
C. Tremblay, CMA
September 11, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX - Advance Income Tax Ruling Request

This is in reply to your letter of June 18, 2001, and further to our telephone conversation of July 5, 2001 (XXXXXXXXXX/Tremblay) in respect of the above noted ruling request.

As discussed in our telephone conversation, when a proposal is made to pay a damage payment as part of wrongful dismissal settlement, the damages generally qualify as a retiring allowance. During our conversation you acknowledged our concerns and advised that you would provide us with further directions. However, to date we have not received any further information and we presume you do not wish to proceed with your request.

The term "retiring allowance" is defined in subsection 248(1) of the Income Tax Act (the "Act"), in part, as "an amount...received...in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal." The Supreme Court of Canada found in Savage, 83 DTC 5409 and Nowegijick, 83 DTC 5041 that the words "in respect of" are "... of the widest possible scope". They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters. Accordingly, it is our view that, for example, amounts received as compensation for damages to health, extended pain, and mental distress suffered by an individual as a result of the loss of his or her employment are taxed as a retiring allowance. We would also note that in John James Young (TCC), 86 DTC 1567, damages for mental distress and exemplary damages were found to be "in respect of the loss of an office or employment" and therefore found to qualify as a retiring allowance.

Accordingly, we are now closing our file.

Your deposit will be returned under separate cover.

Yours truly

Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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