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: Whether payment received by a taxpayer from XXXXXXXXXX as an out of court settlement on a claim for long term disability payments from a disability insurance plan in which the taxpayer's former employer had made a contribution.
Position: Payment is taxable.
Reasons: Our position that such an amount is taxable pursuant to paragraph 6(1)(a) or (f) of the Income Tax Act is well known and was recently affirmed by the Tax Court of Canada in the case of Catherine Dumas v. Her Majesty the Queen, 2000 DTC 2603.
XXXXXXXXXX 2001-007583
J. E. Grisé
April 6, 2001
Dear XXXXXXXXXX:
Re: Payment from XXXXXXXXXX
This is in reply to your letter of March 9, 2001, requesting our opinion on the income tax consequence of a payment you received from the XXXXXXXXXX (the insurance company) in XXXXXXXXXX.
As requested, we have considered the situation outlined in your letter and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4. Thus, our comments are of a general nature only.
Facts
1. As a result of injuries from an attack you were paid benefits by the insurance company, for the period XXXXXXXXXX, pursuant to a group policy for disability insurance (the policy) held by your former employer, XXXXXXXXXX.
2. XXXXXXXXXX had made contributions under the disability insurance plan.
3. The insurance company refused to pay benefits pursuant to the policy since XXXXXXXXXX.
4. You filed a suit against the insurance company in which you claimed, inter alia, a judgement in the amount of $XXXXXXXXXX for disability benefits from XXXXXXXXXX to the date of the suit.
5. In exchange for $XXXXXXXXXX the suit was dismissed by consent and you released the insurance company from any liability with respect to the policy.
In our view, the $XXXXXXXXXX payment you received from the insurance company must be included in computing your XXXXXXXXXX income from an office or employment. Attached is a copy of a recent Tax Court of Canada decision in the case of Catherine Dumas v. Her Majesty the Queen, in which a similar case was considered.
Your letter refers to interpretation bulletin IT-467R, Damages, Settlements and similar payments, as support for your contention that the amount you received is not income subject to income tax. IT-467R deals mainly with the deduction of amounts paid or payable by a taxpayer as damages in respect of a financial loss, injury or deterioration caused by the taxpayer to another person or to a business or property of another person. The bulletin does not deal with the tax consequence of receiving settlements or other payments.
If you have any further questions, please contact XXXXXXXXXX Tax Services Office.
We hope our comments are helpful.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Enclosure
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© Her Majesty the Queen in Right of Canada, 2001
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© Sa Majesté la Reine du Chef du Canada, 2001
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