October 07, 2011

Phillip Overin (Appellant) v. Her Majesty the Queen (Respondent)

98 DTC 1299
Tax Court of Canada
November 25, 1997

(Court File No. 95-3761(IT)G).)

Inclusions in income — Retiring allowances — Taxpayer’s employment terminated — Province of British Columbia paying taxpayer a lump sum (for political reasons) and taxpayer assigning his right to sue his employer to the province — Whether such lump sum a retiring allowance in taxpayer’s hands — Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, ss. 56(1)(a), 110.6(3) and 248(1).

On February 5, 1992, C Corp.’s receiver notified the taxpayer that his employment with C Corp. was terminated. On March 23, 1992, A Inc., acting as agent for the Province of British Columbia, paid the taxpayer a lump sum as a result of a politically motivated agreement between the province and all of C Corp.’s terminated employees. In his 1992 return, the taxpayer characterized such lump sum as the proceeds of disposition of a capital property (i.e., his right to sue C Corp. which he assigned to the province). On reassessment, the Minister characterized the lump sum in issue as a “retiring allowance” to be included in his income for 1992. The taxpayer appealed to the Tax Court of Canada.

Held: The taxpayer’s appeal was dismissed. Undoubtedly the taxpayer had assigned his rights to sue C Corp. to the province, and the lump sum received constituted his proceeds of disposition of capital property. However, such lump sum was not a damage award, but a “retiring allowance”, since the taxpayer had lost his employment. The Minister’s assessment was affirmed accordingly.