If the event that had served as the basis for the personal injury claim also caused the claimant to suffer a physical injury, then there could be no tax on any resulting settlement.
If someone’s negligence caused another person to become seriously ill, the sick victim could file a personal injury claim. Later that same, sick claimant would not have to pay any tax, for the settlement money.
Who might receive money, as the result of a personal injury settlement?
It could be someone that had submitted a personal injury claim with an insurance company, and had negotiated a settlement.
It could be a plaintiff in a trial that had been initiated by the filing of a personal injury complaint, and had caused the scheduling of the appropriate lawsuit process.
Exceptions to the above rules, concerning what money is taxable
If a claimant’s injury had resulted from a breach of contract, and the injured claimant had sued the person that breached that particular contract, the government could tax the money that the same claimant won, as a result of a negotiated settlement.
Any plaintiffs that happen to win punitive damages, following litigation that had been initiated by a personal injury lawsuit, should be ready to pay taxes on the money from the same punitive damages.
—If the plaintiff was also supposed to receive money from a court ordered judgment, the injury lawyer for the plaintiff in Ottawa could request a separation of the verdict.
—That request would be made so that the client/plaintiff would be paying taxes on only the punitive damages.
Any interest placed on an order of judgment, while litigation of the related personal injury case was pending, could be taxed. That would include any interest that had accumulated since the date for the filing of the complaint that had resulted in the scheduling of a personal injury lawsuit.
Both the state and federal government would have the right to tax any money received for an emotional injury, rather than a physical one.
In the past, injured victims of a defective product have claimed emotional injury, with only a minor injury. The government would have a right to tax any money that was awarded to such a victim.
Even if one of the same victims had suffered the physical consequences from a breach of implied contract, and had sued the maker of the defective product, the money paid to the same victim could be taxed. The exceptions to the existing rules include an allowance for the taxing of settlement money, if the recipient of that same money had chosen to sue the person/business that had breached a contract, and had thus caused the claimant or plaintiff’s injury.