After the taxpayer was wrongfully dismissed, an arbitrator ordered that the taxpayer be reinstated and be paid his back pay. The corporate employer wrongfully refused to reinstate the taxpayer, and the taxpayer obtained a court order for damages, reimbursement of legal costs and interest.
Regarding such legal costs reimbursement, the Directorate stated:
this reimbursement is not included in the definition of retiring allowance in subsection 248(1) and consequently will not be included in the taxpayer's income by virtue of subparagraph 56(1)(a)(ii). However, the taxpayer will be required to include the $XXXXXXXXXX so repaid in computing his income pursuant to paragraph 56(1)(l.1). The corporation is not required to issue an information slip for the $XXXXXXXXXX.