摘要：The Canada Revenue Agency (CRA) maintains that all personal injury damages are exempt from income tax, but has provided little explanation for its position. The CRA’s practice of not including such receipts in income makes it unlikely that Canadian courts will have the opportunity to fully consider the proper legal treatment of personal injury damages. This article examines the tax policy implications of taxing each of the following types of personal injury damages: loss of working capacity, non-pecuniary damages, and cost-of-care awards. It is argued that damages for loss of working capacity and non-pecuniary damages should be fully taxed, since they are best viewed as replacing capital assets with low basis. It is also shown that horizontal and vertical equity may be better achieved if damages for cost of care are fully taxed, given the existing medical expense tax credit. Income-bunching concerns are not considered significant enough to justify capital gains treatment, although a one-half exemption would be more politically viable than forward averaging. In conclusion, if the current tax exemption for personal injury damages is maintained, it must be justified as a tax expenditure rather than on other tax policy grounds.
