Taxation and the Assessment of Income-Related Damage Awards (1994)

LRC Reports

Keywords: damages; award; personal; injury; compensation; future loss; earnings; income; taxation; tax; gross-up; R. v. Jennings

When a court makes an award of damages to an injured person to compensate for lost earnings, the damages are calculated and awarded as if that person’s earnings attract no tax. This approach, stemming from the Supreme Court of Canada’s 1966 decision R. v. Jennings, leads to illogical results, including the overcompensation of injured parties in many cases. The report identifies problems caused by the current approach, and recommends an amendment to the Law and Equity Act to modify the common law.

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