J.D. Jones (613) 957-2104
XXXX
Jan 30 1989
Dear Sirs:
Re: Request for Advance Income Tax Ruling
XXXX
This is in reply to your letter of November 15, 1988 and further to our telephone conversation XXXX Jones) of January 18, 1989 wherein you requested an advance income tax ruling on behalf of the XXXX with respect to an arbitration award.
We are unable to provide an advance income tax ruling as requested as the request is not in respect of a proposed transaction and as such does not meet the Department's requirements as stated in Information Circular 70-6R dated December 16, 1978.
We are however, prepared to offer our opinion on the taxation of the arbitration award. After having reviewed the full text of the arbitration award, in our view, the award is subject to tax as employment income pursuant to subsection 5(1) of the Income Tax Act as the award was made to replace income which should have been received by the taxpayers' [sic] by virtue of their employment contract.
We are of the opinion that this principle is supported in the cases Quance v. The Queen 74 DTC 6210 (F.C.T.D.) and Gagnon v. MNR 61 DTC 307 (T.A.B.).
In determining the taxation year in which the union members are required to include the award in income , it is our view that the amounts are properly included in income on the earlier of the date on which payment is received from the union and the date on which each individual is made aware of the amount to which he is entitled and, therefore, has a legal right to receive the amount.
Your deposit will be returned under separate cover.
Yours truly,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR
P.D. Fuoco
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch