| 19(1) | File No. 5-9390 |
| P. Diguer | |
| (613) 957-2123 |
February 21, 1990
Dear Sirs:
Re: Subsection 256(1.4) and paragraph 251(5)(b) of the Income Tax Act (Canada) (the "Act")
We are writing in response to your letter of January 9, 1990 wherein you requested our views regarding the term "permanent disability" as provided in paragraphs 256(1.4) (a) and (b) and subparagraphs 251(5)(b)(i) and (ii) of the Act.
Our Comments
A disability as defined by the World Health Organization, is "any restriction or lack of ability to perform an activity in the manner or within the range considered normal for a human being".
This concept is characterized by excesses or deficiencies of customarily expected behaviour or activity and these may be temporary or permanent reversible or irreversible, and progressive or regressive.
The determination of whether a particular disability can be characterized as "permanent", for purposes of paragraphs 256(1.4) (a) and (b) and subparagraph 25l(5)(b)(i) and (ii), is a question of fact and accordingly, each case must be considered individually. As such, we are unable to provide a detailed reply with regards to the concerns expressed in your earlier referenced letter.
Nevertheless, we offer the following general comments with regards to this particular matter.
The provisions of subsection 256(1.4) and paragraph 25l(5)(b) provide, inter alia, that anyone having an option or right to acquire shares or having a right to cause a corporation to redeem, acquire or cancel shares of its, capital stock owned by other shareholders of the corporation, shall be treated, for purposes of certain provisions of the Act, as having exercised the option or right or, alternatively, as having caused the redemption, acquisition or cancellation of shares as outlined above. Exceptions to the above are provided "... where the contract provides that the right is not exercisable until the death, bankruptcy or permanent disability of an individual designated therein ...".
The term "permanent disability" is not defined in the Act and, therefore, in accordance with the "modern rule" for the construction of statutes as expressed by E.A. Dreidger in his book "Construction of Statutes", 2nd ed., (1983) and referred to by Estey J. in Stubart Investments Limited v. Her Majesty the Queen, (5 C.C) 84 DTC 6305 at page 6323 these words "are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament". The ordinary sense of the words "permanent" and "permanent disability" have been commented on as follows:
The Oxford English Dictionary, Second edition, 1989, defines "permanent" to mean, inter alia:
"continuing or designed to continue indefinitely without change; abiding, lasting, enduring, persistent. Opposed to temporary".
Webster's Ninth New Collegiate Dictionary, 1987, defines the same term to mean, inter alia:
"continuing or enduring without fundamental or marked change".
In addition, Black's Law Dictionary, fifth edition, 1979, defines "permanent disability" to mean, inter alia:
"Incapacity forever from returning to work formerly performed before accident, though this incapacity may be either total or partial."
" .... one which will remain substantially the same during remainder of workers' compensation claimant's life ..."
It is important to note that a tax credit for mental or physical impairment (disability tax credit) is available, pursuant to subsection 118.3(l) of the Act, to any individual who has a "severe and prolonged mental or physical impairment".
Paragraph 118.4(1)(a) provides, inter alia, that for purposes of this disability tax credit, "a person shall be considered to have a severe and prolonged impairment only if by reason thereof he is markedly restricted tn his activities of daily living and the impairment has lasted or can reasonably be expected to last for a continuous period of at least 12 months."
The fact that Parliament chose the term "permanent disability" for purposes of paragraphs 256(1.4)(a) and (b) and subparagraphs 251(5)(b)(i) and (ii), and not "severe.and prolonged mental or physical impairment" as outlined above, would indicate, in our view, an intent on their part to target the exceptions therein to impairments which are expected to last for continuous periods that well exceed the period provided in paragraph 118.4(1)(a) of the Act. This intent is also evident from the framework in which the reference to "permanent disability" is situated within the particular provisions of the law as cited earlier, i.e. death, bankruptcy or permanent disability.
The intent of Parliament as discussed above, along with the definition of "permanent" and "permanent disability" as described above, would all indicate, in our view, that the exceptions as contemplated in subsection 256(1.4) and paragraph 251(5)(b) of the Act, target events, the results of which would be, lifelong.
As such, it is our view that a permanent disability for purposes of paragraphs 256(1.4)(a) and (b) and subparagraph 251(5)(b)(i) and (ii), would involve a disability which has incapacitated the individual from performing functions formerly performed before the event which has caused the disability and there is no reason to believe that such incapacity will not continue throughout the lifetime of the person.
We trust our comments will be of assistance.
Yours truly,
for DirectorReorganization and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch