Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Is compensation received by an individual from the province of Quebec as a result of having acquired Hepatitis C taxable?
Position: Question of fact but generally, no.
Reasons: As indicated in paragraph 2 of IT-365R2, Damages, Settlements and Similar Receipts, amounts received by a taxpayer as special or general damages for personal injury are excluded from income. If the compensation is in respect of special or general damages for personal injury as a result of you having acquired Hepatitis C through a blood transfusion, then, generally, it is our view that it would not be required to be included in income.
XXXXXXXXXX 2000-000537
G. Moore
March 14, 2000
Dear XXXXXXXXXX:
Re: Compensation Received from the Province
of Québec as a Result of Having Acquired Hepatitis C
This is in reply to your letter of January 31, 2000, regarding compensation received from the government of Québec as a result of you acquiring Hepatitis C from a blood transfusion after being in an automobile accident.
You have received $XXXXXXXXXX from Santé Québec in XXXXXXXXXX, which you believe is compensation for having acquired Hepatitis C from a blood transfusion. You are asking if the $XXXXXXXXXX is taxable and has to be reported on your XXXXXXXXXX income tax return. You also refer to bi-weekly income replacement indemnities you receive from la Société de l'assurance automobile du Québec ("SAAQ"), which you state are non-taxable, as indicated in the Income Tax Guide. You are enquiring why these payments do not qualify as earned income for purposes of the registered retirement savings plan (RRSP) deduction limit.
As indicated in paragraph 2 of IT-365R2, Damages, Settlements and Similar Receipts, (copy enclosed) amounts received by a taxpayer as special or general damages for personal injury are excluded from income. It is our understanding that the $XXXXXXXXXX you received is compensation in respect of special or general damages for personal injury as a result of you having acquired Hepatitis C through a blood transfusion. Accordingly, it is our view that generally, it would not be required to be included in your income for the year you received it.
With respect to the income replacement indemnities you receive from SAAQ, compensation received in respect of personal injuries from a province as a consequence of a motor vehicle accident is non-taxable and does not qualify as "earned income" for purposes of calculating the "RRSP deduction limit", as those terms are defined in subsection 146(1) of the Income Tax Act. You believe that since the payments from SAAQ represent a replacement of the salary you were earning before the car accident, these payments should qualify as earned income for RRSP purposes. The Canada Customs and Revenue Agency ("the Agency") only administers legislation as proposed by the Department of Finance and enacted by Parliament. Your comments regarding the fairness of income tax legislation relate to tax policy, which is the responsibility of the Department of Finance. Accordingly, you may wish to bring your concerns to the attention of the Tax Policy Division, Department of Finance, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
We trust our reply will be of assistance.
Yours truly,
J. Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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