| 911850 | |
| J.A. Szeszycki | |
| 24(1) | (613) 957-2135 |
November 12, 1992
Dear 19(1)
Re: Awards of General Damages under Human Rights Code, 1981
This is in reply to your letter of May 21, 1991, addressed to Mr. Alexander Davidson of our Legal Services concerning the tax treatment of the subject awards. This reply is also further to telephone conversations you have had with Mr. Marc Vanasse and, more recently, Mr. Jack Szeszycki of this Directorate. We apologize for the delay encountered in finalizing our response to your enquiry. As indicated by telephone, the issue raised prompted an extensive review of the Department's position on the treatment of awards for general damages (such as damages awarded for loss of self respect, mental anguish, humiliation or hurt feelings) relative to the definition of "retiring allowance" in subsection 248(1) of the Income Tax Act (the Act).
As a result of this review, the Department's position can be expressed as follows:
a) For the purpose of the definition of "retiring allowance" in subsection 248(1) of the Act, damages will not be considered by the Department to include general damages awarded by a human rights tribunal and, accordingly, the amount of such damages will not be included in income under subparagraph 56(1)(a)(ii) of the Act.
b) Out-of-court settlements of human rights cases will be examined on a case-by-case basis in order to determine their tax implications and the reasonableness of an amount settled upon in respect of general damages will be influenced by the maximum amount that can be awarded under the applicable provincial legislation and the evidence presented in the case.
If any further clarification is needed please contact Mr. Jack Szeszycki of this Directorate who may be reached at (613) 957- 2135.
Yours truly,
P.D. FuocoSection ChiefPersonal and General SectionBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch
c.c. C.M. Nadeau, Legal Services