Tourigny – Court of Quebec finds that damages for a burnt warehouse were compensation for lost profits rather than proceeds of goodwill

The taxpayer (“Trac-World”), whose warehouse was destroyed by fire, received damages from the local municipality in settlement of its claim for providing inadequate water supply during the fire. The quit claim stated that the sum was paid to compensate for the loss of Trac-World customers.

Trac-World reported the sum as being proceeds of disposition of goodwill, giving rise to an eligible capital amount. In finding that, under the surrogatum principle, the amount instead was fully taxable as compensation for lost profits, Bergeron JCQ noted that over 90% of Trac-World’s claim had been for lost profits and that its statement of claim had made no mention of loss of goodwill.

Neal Armstrong. Summary of Tourigny v. Agence du revenu du Québec, 2024 QCCQ 1914 under s. 9 - compensation payments.