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:
Individual suffers from Hepatitis C and has enquired about the tax treatment of any compensation he may receive as a result of his medical condition and in light of the findings of the Commission of Inquiry on the Blood System in Canada by Justice Krever.
Position:
No opinion given as to the tax treatment of any future payments that may be made to the taxpayer as compensation.
Reasons:
It is a question of fact whether the payments, if any, are to be considered compensation for general or special damages for personal injury or death. Referred taxpayer to IT-365R2 and provided general comments.
MINISTER/DEPUTY MINISTER'S OFFICE YS 7-07402M
ASSISTANT DEPUTY MINISTER'S OFFICE
RETURN TO RULINGS, 15TH FLOOR, ALBION TOWER
February 13, 1998
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to respond to your letter of November 27, 1997, addressed to your Member of Parliament, XXXXXXXXXX, concerning possible compensation for hemophiliacs who contracted hepatitis C, in light of the findings of the Commission of Inquiry on the Blood System in Canada.
In your letter, you indicate that hemophiliacs with hepatitis C, such as yourself, should receive compensation in light of the findings of the above-mentioned Commission. In addition, you believe that any such compensation should be tax-exempt. With respect to the issue of tax-exempt compensation, a characterization of damages for income tax purposes is a question of fact to be determined after reviewing all the relevant circumstances in each case. As the issue outlined in your correspondence depends on the nature of future payments as well as other facts, we are therefore not in a position to give you a definitive response regarding the tax treatment of any such payments. However, we can offer the following general comments.
Paragraph 2 of the enclosed Interpretation Bulletin IT-365R2, Damages, Settlements and Similar Receipts, explains that all amounts received by a taxpayer that qualify as special or general damages for personal injury or death, will be excluded from income regardless of the fact that the amount of such damages may have been determined with reference to the loss of earnings of the taxpayer in respect of whom the damages were awarded. Amounts in respect of damages for personal injury or death may be received by an injured taxpayer on account of special damages and general damages. Examples of special damages include compensation for out-of-pocket expenses such as medical and hospital expenses, and accrued or future loss of earnings. Examples of general damages include compensation for pain and suffering and the loss of earning capacity. In cases involving out-of-court settlements, all the circumstances surrounding the payment must be examined before the tax treatment of such payments can be determined.
I hope that these comments will be of assistance to you.
Yours truly,
Denis Lefebvre Assistant Deputy Minister Policy and Legislation Branch
G. Moore
December 24, 1997
952-1506