| This thesis examines the appropriate tax treatment of personal injury damages in Canada. It is argued that the application of the traditional tax evaluative criteria of equity, neutrality, and simplicity results in a conclusion that all personal injury damages should be taxed. However, an examination of non-tax considerations reveals that taxing personal injury damages could, in many cases, hinder the ability of tort law to meet its goals. It is argued that tort and tax law objectives can be reconciled by amending the Income Tax Act (Canada) to allow all personal injury damages for loss of future earnings to be invested in an annuity and to tax all payments from that annuity when received by the plaintiff. It is further proposed that the amendment should provide that damages for loss of past earnings and damages for loss of future earnings not invested in an annuity be included in income, and should explicitly provide that damages for loss of homemaking capacity, cost of care, and non-pecuniary losses are exempt from tax. |
