,canada ,co/ums                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,damages1 ,settle;ts & ,simil>
  ,receipts
,numb]3 ,,it-#cfe;,r#b
,date3 ,may #h1 #aihg
,ref];e3 ,sec;n #c 7al sec;n #f1
  subsec;ns #e7#a71 #ab.b7#a7 & 7#c71
  #ad7#a71 #af7#a71 #ef7#a71 & #bdh7#a71
  p>agraphs #ha7#a77g4#a7 & 7g4#b7 &
  subp>agraphs #ad7#e77a77;iv7 &
  #ef7#a77a77;ii774

  ,? bullet9 replaces & c.els ,,it-
#cfe;,r dat$ ,m>* #i1 #aiha &! ,special
,rel1se 6,,it-#cfe;,r : 0 issu$ on ,may
#be1 #aihd4 ,curr5t revi.ns >e designat$
0v]tical l9es4

#a4 ,? bullet9 d1ls )! tr1t;t = tax
  purposes ( am.ts rcvd               #a
             ,,it-#cfe;,r#b          a#a
  7a7 \ ( claims = damages = p]sonal
    9jury or d1?1
  7b7 z -p5s,n =! loss ( prop]ty or
    9come1
  7c7 z crime -p5s,n aw>ds1 &
  7d7 on t]m9,n ( employ;t4
  
        ,am.ts rcvd z ,damages 9
     ,respect ( ,p]sonal ,9jury or
           ,d1? 7p>agraph #b7
    
#b4 ,am.ts 9 respect ( damages = p]sonal
  9jury or d1? may 2 rcvd 0an 9jur$
  taxpay] or 0a dep5dant (a dec1s$
  taxpay] on a3.t (3
  7a7 ,special damages--examples >e
    -p5s,n =
    7;i7 \-(-pocket exp5ses s* z m$ical
      & hospital exp5ses1 &
    7;ii7 a3ru$ or future loss ( e>n+s &
  7b7 ,g5]al damages--examples >e -p5s,n
    =
    7;i7 pa9 & su6]+1
    7;ii7 ! loss ( am5ities ( life1   #b
             ,,it-#cfe;,r#b          b#a
    7;iii7 ! loss ( e>n+ capac;y1
    7;iv7 ! %ort5$ expect,n ( life &
    7;v7 ! loss ( f9ancial support caus$
      0! d1? (! support+ 9dividual4
  ,all am.ts rcvd 0a taxpay] or !
  taxpay]'s dep5dant1 z ! case may be1 t
  qualify z special or g5]al damages =
  p]sonal 9jury or d1? w 2 exclud$ f
  9come reg>d.s (! fact t ! am.t ( s*
  damages may h be5 det]m9$ ) ref];e 6!
  loss ( e>n+s (! taxpay] 9 respect (
  :om ! damages 7 aw>d$4 ,h["e1 an am.t
  : c r1sonably 2 3sid]$ 6be 9come f
  employ;t r ?an an aw>d ( damages w n 2
--------------------------------------#b
  exclud$ f 9come4 ,! tax tr1t;t ( an
  aw>d ( -p5s,n1 z adjudicat$ 0a -p5s,n
  bo>d or -mis.n 9 ,canada1 : is rcvd z
  a result (a "w] hav+ su6]$ 9jury1
  4abil;y or d1? :ile p]=m+ ! duties (
  employ;t1 is expla9$ 9 ,,it-#bjb;,r#b4


                                      #c
         ,aw>ds ,n ,3sid]$ 6be       a#b
        ,annuities 7p>agraph #c7
    
#c4 ,an aw>d ( damages = p]sonal 9jury
  or d1? t decrees t x 2 pd 9 p]iodic
  pay;ts is n1 despite s* p]iodic
  pay;ts1 3sid]$ 6be an annu;y 3tract =!
  purposes ( subsec;ns #ab.b7#c7 &
  #ef7#a7 &! p]iodic pay;ts !mvs >e n
  3sid]$ 6be annu;y pay;ts4 ,h["e1 an
  annu;y 3tract pur*as$ 0a taxpay] or a
  taxpay]'s repres5tative ) proce$s (a
  lump sum aw>d rcvd = damages = p]sonal
  9jury or d1? w 2 an annu;y 3tract =
  all purposes (! ,act & w1 except 9 !
  circum/.es describ$ 9 #f 2l1 give rise
  69come 9 ! taxpay]'s h&s4

        ,9t]e/ ,ele;t ( ,aw>ds =
        ,p]sonal ,9jury or ,d1?
             7p>agraph #d7
    
#d4 ,": an am.t 9 respect ( damages =
  p]sonal 9jury or d1? has be5 aw>d$ 0a
  ,c\rt or resolv$ 9 an \-(-c\rt      #d
             ,,it-#cfe;,r#b          b#b
  settle;t1 no "p ( s* am.t w 2 9come 6!
  recipi5t ev5 ?\< ! am.t 9cludes or is
  aug;t$ 0an am.t :1 pursuant 6! t]ms (!
  ,c\rt ord] or ! settle;t agree;t1 is
  ref]r$ 6z 9t]e/4 ,h["e1 ": an am.t t
  has be5 aw>d$ = damages is held on
  deposit1 ! am.t ( 9t]e/ e>n$ w 2
  9clud$ 9 ! 9come (! 9jur$ taxpay] un.s
  p>agraph #ha7#a77g4#a7 or 7g4#b7 has
  applic,n 7see #f 2l74 ,": an am.t t
  has be5 aw>d$ = damages is held 9
  tru/1 any 9t]e/ e>n$ on ! am.t is
  9come (! tru/ or (! b5efici>y1 dep5d+
  on ! circum/.es4

     ,/ructur$ ,settle;t 7p>agraph
                  #e7
    
#e4 ,a 8/ructur$ settle;t0 is a m1ns (
  pay+ or settl+ a claim = damages1
  usu,y ag/ a casualty 9sur]1 9 s* a way
  t am.ts pd 6! claimant z a result (!
  settle;t >e free f tax 9 ! claimant's
                                      #e
             ,,it-#cfe;,r#b          c#b
  h&s4 ,6cr1te s* a /ructur$ settle;t !
  foll[+ 3di;ns m/ 2 -pli$ )3
  7a7 a claim = damages m/ h be5 made 9
    respect ( p]sonal 9jury or d1?1
  7b7 ! claimant &! casualty 9sur] m/ h
    r1*$ an agree;t "u : ! latt] is
    -mitt$ 6make at l1/ p]iodic pay;ts
    6! claimant = ei a fix$ t]m or !
    life (! claimant1
  7c7 ! casualty 9sur] m/
    7;i7 pur*ase a s+le premium annu;y
      3tract : m/ 2 non-assigna#1 non-
      commuta#1 non-transf]a# & design$
      6produce pay;ts equal 6! am.ts1 &
      at ! "ts1 specifi$ 9 ! agree;t
      ref]r$ 6in 7b71
--------------------------------------#c
    7;ii7 make an irrevoca# direc;n 6!
      issu] (! annu;y 3tract 6make all
      pay;ts "!"u directly 6! claimant1
      &
    7;iii7 rema9 lia# 6make ! pay;ts z
      requir$ 0! settle;t agree;t 7i4e41
      ! annu;y 3tract pay\t74         #f
             ,,it-#cfe;,r#b          a#c
  ,z a 3sequ;e ( -pli.e )! =ego+ 3di;ns1
  ! casualty 9sur] is ! [n] (1 &
  annuitant 7b5efici>y7 "u1 ! annu;y
  3tract & m/ report z 9come ! 9t]e/
  ele;t 9h]5t 9 ! annu;y 3tract :ile !
  pay;ts rcvd 0! claimant repres5t1 9 !
  ,de"p;t's view1 non-taxa# pay;ts =
  damages4

     ,9come f ,prop]ty t 0 ,rcvd 0a
     ,taxpay] ,"u #ba ,ye>s ( ,age
        z an ,aw>d ( ,damages =
       ,p]sonal ,9jury 7p>agraphs
                 #f-g7
    
#f4 ,=! #aihd & subsequ5t tax,n ye>s1
  p>agraphs #ha7#a77g4#a7 & 7g4#b7
  exempt f tax ! 9come (a taxpay] f
  "picul> s\rces = tax,n ye>s dur+ any
  "p ( : ! taxpay] 0 "u #ba ye>s ( age4
  ,6qualify = ? exemp;n ! 9come m/1 dur+
  ! "picul> tax,n ye>s1 2 deriv$ f "o or
  m (! foll[+ s\rces3
                                      #g
             ,,it-#cfe;,r#b          b#c
  7a7 prop]ty rcvd 0or on 2half (a
    taxpay] :o is "u #ba ye>s ( age z an
    aw>d (1 or pursuant 6an ac;n =1
    damages 9 respect (! taxpay]'s
    physical or m5tal 9jury1
  7b7 prop]ty sub/itut$ = prop]ty
    describ$ 9 7a71
  7c7 a capital ga9 deriv$ f ! 4posi;n (
    prop]ty describ$ 9 7a7 or 7b71 or
  7d7 9ve/$ 9come t was1 0virtue (
    p>agraph #ha7#a77g4#a7 or 7g4#b71 n
    requir$ 6be 9clud$ 9 ! taxpay]'s
    9come =a "picul> tax,n ye> describ$
    abv4
  ,=! purposes ( p>agraphs #ha7#a77g4#a7
  & 7g4#b7 9come w 9clude 9come rcvd &
  receiva# & 9come a3ru$ 7i4e41 e>n$ b n
  rcvd7 up to1 b n 2y1 ! 5d (! tax,n ye>
  9 : ! taxpay] atta9s ! age ( #ba ye>s4
#g4 ,= tax,n ye>s 5d+ af #aiga & 2f
  #aihd1 =m] p>agraph #ha7#a77g4#a7


                                      #h
             ,,it-#cfe;,r#b          c#c
  7a7 caus$ ! exempt p]iod 65d on ! "d
    immly prec$+ ! "d on : ! 9jur$
    taxpay] atta9$ ! age ( #ba ye>s1 &
  7b7 re/rict$ exempt 9come 69come t 0
    actu,y rcvd :ile ! 9jur$ taxpay] 0
    "u #ba ye>s ( age4
  
      ,receipts 9 ,respect ( ,non-
       ,p]=m.e ( ,busi;s ,3tracts
            7p>agraphs #h-i7
    
#h4 ,an am.t rcvd 0a taxpay] 9 lieu (!
  p]=m.e (! t]ms (a busi;s 3tract 0! o!r
  "py 6t 3tract may1 dep5d+ on ! facts1
  2
--------------------------------------#d
  ei an 9come or capital receipt4 ,if !
  receipt relates 6! loss ( an 9come-
  produc+ asset1 x w 2 3sid]$ 6be a
  capital receipt2 on ! o!r h&1 if x is
  -p5s,n =! loss ( 9come1 x w 3/itute
  busi;s 9come4 ,ag1 :ile x is a "q (
  fact z 6:e!r a receipt is an 9come or
                                      #i
             ,,it-#cfe;,r#b          a#d
  capital am.t1 ! foll[+ factors >e
  important 9 mak+ ? 4t9c;n3
  7a7 if ! -p5s,n is rcvd =! failure
    6rcv a sum ( m"oy t wd h be5 an
    9come item if x _h be5 rcvd1 !
    -p5s,n w likely 2 an 9come receipt1
  7b7 8": = example1 ! /ructure (!
    recipi5t's busi;s is s fa%ion$ z
    6absorb ! %ock z "o (! normal
    9cid5ts 6be look$ =& ": x appe>s t !
    -p5s,n rcvd is no m ?an a surrogatum
    =! future pr(its surr5d]$1 ! -p5s,n
    rcvd is 9 use 6be tr1t$ z a rev5ue
    receipt & n a capital receipt01 &
  7c7 8:5 ! "rs & advantages surr5d]$ on
    c.ell,n >e s* z 6de/roy or mat]i,y
    6cripple ! :ole /ructure (!
    recipi5t's pr(it-mak+ app>atus1
    9volv+ ! s]i\s 4loc,n (! normal
    -m]cial organiz,n & result+ p]h 9 !
    cutt+ d[n (! /aff previ\sly requir$1
    ! recipi5t (! -p5s,n may prop]ly
    a6irm t ! -p5s,n repres5ts ! price
    pd =! loss or /]iliz,n (a        #aj
             ,,it-#cfe;,r#b          b#d
    capital asset & is "!=e a capital &
    n a rev5ue receipt40
  77b7 & 7c7 abv >e quot,ns f ! judge;t
  9 ,-mis.n] ( ,9l& ,rev5ue v4 ,flem+ &
  ,co4 7,ma*9]y7 ,ltd41 #cc;,,tc#eg
  7,h\se ( ,"ls774
#i4 ,": an am.t rcvd 0a taxpay] z -p5s,n
  =a br1* (a busi;s 3tract is a capital
  am.t ac 6! -;ts 9 #h abv1 t am.t wd
  relate ei 6a "picul> asset (! taxpay]
  or 6! :ole /ructure (! taxpay]'s
  pr(it-mak+ app>atus4 ,if1 on ! basis
  (! facts (! case1 s* z ! t]ms (a
  3tract1 settle;t or judge;t1 ! am.t
  rcvd relates 6a "picul> asset 7tangi#
  or 9tangi#7 : is sold1 de/roy$ or
  ab&on$ z a 3sequ;e (! br1* ( 3tract1 x
  w 2 3sid]$ proce$s ( 4posi;n ( t asset
  or a "p "!(1 z ! case may be4 ,": !
  am.t ( -p5s,n relates 6a "picul> asset
  t 0 n 4pos$ (1 ! am.t w s]ve 6reduce !
  co/ ( t asset 6! taxpay]4 ,on ! o!r
  h&1 ": ! am.t ( -p5s,n is (a capital
  nature b x does n relate 6a        #aa
             ,,it-#cfe;,r#b          c#d
  "picul> asset z 9dicat$ abv1 ! am.t w
  2 3sid]$ z -p5s,n =! de/ruc;n (1 or z
  damages to1 ! :ole pr(it-mak+ app>atus
  (! taxpay]'s busi;s4 ,s* -p5s,n may
  result 9 an 8eligi# capital am.t0 =!
  purpose ( subsec;n #ad7#a7 &
  subp>agraph #ad7#e77a77;iv74
--------------------------------------#e
       ,-p5s,n = ,loss ( ,busi;s
      ,9come or ,busi;s ,prop]ties
             7p>agraph #aj7
    
#aj4 ,am.ts rcvd 0a taxpay] ) respect 6!
  loss ( busi;s 9come or busi;s prop]ty
  may fall 96"o (! foll[+ categories3
  7a7 a non-taxa# receipt1
  7b7 an 9come receipt1
  7c7 a receipt result+ f ! 4posi;n (a
    capital prop]ty1 or
  7d7 an eligi# capital am.t4
  ,see ,,it-#ahb =a 4cus.n (! factors t
  det]m9e ! tax /atus (a giv5 receipt4

                                     #ab
        ,crime ,-p5s,n ,aw>ds &      a#e
      ,simil> ,receipts 7p>agraphs
                #aa-ac7
    
#aa4 ,a numb] ( prov9ces make crime-
  comp5s,n aw>ds pursuant 6! au?or;y (
  crim9al-9jury -p5s,n laws4 ,! ,de"p;t
  3sid]s t s* crime-comp5s,n aw>ds >e
  non-taxa#4
#ab4 ,a taxpay] :o is a victim (a crime
  may rcv -p5s,n f a s\rce o!r ?an !
  p]son :o -mitt$ ! crime or a crime-
  comp5s,n bo>d4 ,= example1 a male
  employee (a bank is kidnapp$ & ^u 8
  rel1se ! bank pays ! employee an am.t
  6-p5sate = 8damages0 9flict$ on hm4
  ,": ! am.t ( m"oy or b5efit rcvd is
  -p5s,n = damages ! ,de"p;t w norm,y
  3sid] ! am.t 6be a non-taxa# receipt
  ev5 if ! damages >e -put$ ) ref];e 6!
  victim's sal>y4 ,6qualify z a non-
  taxa# receipt1 ! am.t m/ n 2 9 excess
  (a fair evalu,n (! damages su6]$ 0!
  employee hav+ reg>d 6all relevant
  facts (! case4 ,! am.t (!          #ac
             ,,it-#cfe;,r#b          b#e
  receipt w ord9>ily 2 a3ept$ z a fair
  evalu,n un.s "! >e 9dic,ns 7s* z !
  employ] & employee n d1l+ at >m's
  l5g?7 t ! receipt 9cludes an am.t =
  s]vices r5d]$ 0! employee 6! employ]4
  ,any "p ( an am.t rcvd 0a taxpay] f 8
  employ]1 or =m] employ]1 t is -p5s,n =
  loss ( e>n+s 7e4g41 an am.t pd 9 lieu
  ( regul> wages or b5efits7 result+ f a
  4abil;y ( %ort dur,n w 2 9clud$ 9 !
  9come (! taxpay]4
#ac4 ,": a taxpay]1 o!r ?an an employee1
  is 9 receipt ( an am.t t has n be5
  aw>d$ 0a c\rt or a crime-comp5s,n bo>d
  7a pay;t 0a bank 6a cu/om]1 = example7
  = 8damages0 9flict$ z a result (a
  crime1 ! total am.t is 3sid]$ 6be a
  non-taxa# receipt4

       ,am.ts ,rcvd on ,t]m9,n (
      ,employ;t 7p>agraphs #ad-ae7
    
#ad4 ,applica# ) respect 6! t]m9,n ( an
  (fice or employ;t o3urr+ af        #ad
             ,,it-#cfe;,r#b          c#e
  ,novemb] #ab1 #aiha1 ! def9$ t]m
  8t]m9,n pay;t0 0 rep1l$ 0,s4,c4
  #aihj-ha-hb-hc1 c4#adj4 ,! def9i;n (
  8retir+ all[.e0 9 subsec;n #bdh7#a7 0
  am5d$ 3curr5tly s t am.ts t 7
  previ\sly 9clud$ 9
--------------------------------------#f
  ! def9i;n (a t]m9,n pay;t >e n[ fully
  9clud$ 9 9come z retir+ all[.es "u
  subp>agraph #ef7#a77a77;ii74 ,retir+
  all[.es >e d1lt ) 9 ,,it-#ccg;,r#b4
#ae4 ,": a taxpay] rcvs an am.t pursuant
  6! t]ms ( an employ;t 3tract1 ! am.t
  is 6be 9clud$ 9 -put+ ! taxpay]'s
  9come "u subsec;n #e7#a7 or sec;n #f1
  :i*"e may 2 applica#1 z 9come f an
  (fice or employ;t1 :e!r or n x is rcvd
  on t]m9,n (! employ;t4 ,s* an am.t wd
  9clude1 = example1 sal>y1 wages1 a3ru$
  vac,n pay1 & an am.t pd 9 lieu (
  notice ( t]m9,n4


                                     #ae