Damages

Table of Contents

See Also

St-Georges c. La Reine, 2006 DTC 2969, 2004 TCC 688

Damages paid by the taxpayer in respect of the payment of a dividend to him by a corporation of which he was a director were not amounts incurred by him in connection with any business given that his directorship was not an office (as he was not entitled to any remuneration for acting in that capacity), and amounts earned for accounting services rendered to the company were earned by a corporation owned by him rather than him directly.

Administrative Policy

24 October 2012 External T.I. 2012-0443721E5 F - Compensation - vente d'un immeuble

taxpayer need not have attempted to prevent the act or omission resulting in the damages

In response to an inquiry as to the deductibility of damages paid pursuant to a court judgment in redacted circumstances relating to a sale of a building, CRA stated:

[T]he Bulletin [IT-467R2] states that the taxpayer need not have attempted to prevent the act or omission that resulted in the damages. In fact, the taxpayer need only establish that there was an income-earning purpose for the act or omission, regardless of whether that purpose was actually achieved. …

[W]e do not believe that you paid damages for the purpose of earning income from a business or property. We also do not believe that those damages were incurred in connection with the disposition of a building.

IT-467R2 "Damages, Settlements and Similar Payments"

deductibility assessed at time of conduct

6. ...For purposes of establishing whether damages have been incurred for the purpose of gaining or producing income:

  • the taxpayer need not have attempted to prevent the act or omission that resulted in the damages; and
  • the taxpayer need only establish that there was an income-earning purpose for the act or omission, regardless of whether that purpose was actually achieved.