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.
Dear Sirs:
This is in reply to your letter of November 1, 1990 and further to our telephone conversation (Steeves/Weil) of January 4, 1991 concerning the tax treatment of certain types of payments which may be made under the “ Ontario No-Fault Insurance Program”.
As we understand it, your Department requires some general information on the taxation of damage awards and payments which are commonly paid to victims of motor vehicle accidents. This information is needed in order to determine the amount of guaranteed income supplements that such victims may be entitled to under the Old Age Security Act.
As agreed, we are forwarding you a copy of Interpretation Bulletin IT-365R2 dated May 8, 1987 entitled “Damages, Settlements and Similar Receipts” which should be of assistance to you in this regard. As indicated in paragraph 2 of this publication, amounts received by a taxpayer as damages for personal injury or death are generally not taxable. This is so despite the fact that the amount of such damages may be determined with reference to the loss of earnings of a taxpayer in respect of whom the damages were awarded.
Also enclosed is a copy of Interpretation Bulletin IT-223 dated May 26, 1975 entitled “Overhead Expense Insurance vs. Income Insurance” which states at paragraph 3 that loss of income and disability insurance benefits received under an insurance policy by a taxpayer carrying on business or practising a profession are not considered to be income subject to tax.
Without full details of the circumstances under which payments may be made under this new program, it is difficult to offer more specific comments at this time. If you encounter a particular case where you require further assistance, please feel free to contact us.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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