Principal Issues: [TaxInterpretations translation]
1. Should death benefits paid by the CSST to a mother by virtue of a right held by her minor child be included in the mother's income or in that of the child?
2. Since the benefits of $XXXXXXXXXX received in XXXXXXXXXX were for the period of XXXXXXXXXX, can those amounts be spread over the years in question?
Position:
1. The mother must include the amounts in her income.
2. No.
Reasons:
1. 56(1)(v) states that the person receiving the benefits must include them in income. The mother receives the amounts as custodian of the child.
2. The wording of 56(1)(v) and the jurisprudence confirm that where the legislation provides that an amount received must be included in income, it is at the time of receipt that it must be included and not in the years referred to. 110.2 does not apply.
December 15, 2000
Jonquière Tax Centre Headquarters Client Services Nancy Deslandes
Attention: Ms. Ghyslaine Larouche 2000-005239
CSST retroactive benefits
This is in response to your fax of October 23, 2000, in which you asked for our opinion on the above subject.
You described the situation of a taxpayer who receives a monthly death benefit from the Commission de la santé et de la sécurité du travail (the “CSST”) [occupational health and safety commission] of Quebec, for a minor child.
In XXXXXXXXXX, the total amount received was $XXXXXXXXXX, broken down as follows: a lump-sum amount of $XXXXXXXXXX which covered the period between XXXXXXXXXX, related interest for a total of $XXXXXXXXXX as well as monthly payments of $XXXXXXXXXX for the period between XXXXXXXXXX.
Questions:
1. You wish to know whether the mother or the child should include the amounts received in XXXXXXXXXX in their income.
2. Also, since the $XXXXXXXXXX received in XXXXXXXXXX was for the period from XXXXXXXXXX, can it be spread over the years in question?
Our Comments:
Compensation received under an employees’ or workers’ compensation law of Canada or a province in respect of an injury, a disability or death is included in computing a taxpayer's income under paragraph 56(1)(v) of the Income Tax Act (the “Act”) and is subject to a deduction under subparagraph 110(1)(f)(ii).
Interpretation Bulletin IT-202R2, Employees‘ or workers’ compensation, contains a brief history of the tax treatment of compensation received under a provincial or territorial law of Canada. Among other things, paragraph 2 contains the following information:
“Prior to 1982, the amount of compensation that was received in a taxation year by any person (other than as the employer or former employer of the person in respect of whom the amount was paid) was excluded from income by virtue of paragraph 81(1)(h), which paragraph was repealed applicable to the 1982 and subsequent taxation years. The main income tax effect of the repeal of paragraph 81(1)(h), and other amendments to the Act, is that compensation received, while continuing to be non-taxable, is now included in the income of the person who receives it. The amount of compensation received in a taxation year is therefore relevant in determining
(a) the extent to which the recipient thereof may be claimed as a dependant by another taxpayer, and
(b) the amount that is the aggregate of the family net income and the other supporting person's net income for purposes of the child tax credit.”
Based on the information received, the entitlement to the amounts received by the child's mother was established under section 102 of the Act respecting industrial accidents and occupational diseases, chapter A-3.001 of the Revised Statutes of Québec. This section states that the child of a worker who is a minor at the date of death of the worker, is entitled to an indemnity of $250 per month (plus indexation, if applicable) until the child is of full age. It should be noted, however, that section 137 of the same Act specifies the following with respect to the terms of payment:
137. The Commission shall pay the death benefit provided for in the first paragraph of section 102 to the person having custody of the child who is entitled to compensation.
It therefore appears to us that it is the mother who receives the amounts as custodian of the child and that, consequently, she must include them in her income. However, she is entitled to an equivalent deduction in computing her taxable income under subparagraph 110(1)(f)(ii) of the Act.
As for your second question, paragraph 56(1)(v) stipulates that the compensation received must be included in income in the year in which it is received. Where the legislation provides that an amount received must be included in computing income for the year, it is in that year that the amount must be included and not in the years for which it is paid. The jurisprudence is consistent on this point. Consequently, death benefit amounts must be included in XXXXXXXXXX.
Please note that section 110.2 does not apply to this situation since the definition of “qualifying amount” contained therein excludes amounts for which a deduction may be received under paragraph 110(1)(f).
In addition, interest that accumulates up to the date the compensation is granted does not have to be included in income. That position is presented in Guide T5007, Return of Benefits.
We hope you find these comments of assistance.
Ghislaine Landry, CGA
Acting Manager
Individuals and Business Section
Business and Publications Division
Income Tax Rulings Directorate
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