Canada Revenue Agency Provides Comments on Taxation of Settlement Payments
In 2014-0522921E5, the CRA provides general comments on taxation of settlement payments. The CRA’s position is that whether a settlement payment is taxable is a question of fact based on the nature and purpose of the settlement payment and what the settlement was intended to replace.
2014-0522921E5 gives specific examples of treatment of settlements as ordinary income, settlements as payments for personal injury and settlements that constitute a windfall.