Suing Out the Dead

I was strolling down the street in Newfoundland wondering what would happen if my friend, a young attorney from Boston by way of Saskatchewan, Calgary, London, and Washington got hit by the negligent driver who was doing so with blatant disregard for the rules of the road. We giggled about it for a few minutes, and reminded her that she had no dependents, and as such, the only real loser would be the Commonwealth of Massachusetts because they would lose forty years of tax revenue. Then we both giggled, talked about how funny it would be if the Commonwealth of Mass intervened in the lawsuit I would launch and then we stopped laughing because, to a certain degree, it just made a lot of sense that the state would work to protect its interest in my friend’s future income.

A cursory review of Waddams on Damages shows us two things. First, in Ontario, settlements and damage awards are not taxable in the hands of the victim/recipient, but the disbursement of a settlement and the payment of any damage awards is in fact a deductible expense associated with the ordinary conduct of business. In other words, it isn’t taxable but it is tax deductible. Second, dependents are allowed to sue the individuals who negatively affect their cash flow.

So, just so I have this clear- Despite my grief over my dead friend, it is my settlement award that is reduced because she would have paid taxes on it had it been ordinary income. The corollary is that since I don’t actually have to pay taxes on the settlement funds proper (just the investment income it generates) the person who commits the tort actually gets out of paying me a sizable amount of damages and a greater percentage of that award depending on my tax bracket? REEDICULOUS.

I think the government should get the taxes that are deducted from my settlement by operation of law. I also think the government should be listed as one of my dependents.

Think about it- the government has an expectation that I would contribute to the consolidated revenue fund as a result of the taxes that I would have otherwise had to pay. How do I know this? Well, they do manage to draft budgets that are based on expected earnings in all forms of revenue, including my meager income.

To that end, why should the person who wronged me gets a break in the settlement they have to pay and then government will have to make up for the lost revenue by raising everyone else’s taxes? The correct answer is that they should not. The negligent tort feasor should have the damages owed assessed in full, and then paid out to the two victims – myself and the government of Canada and Ontario.

My friend’s domicile just makes it more interesting- the governments of the various cities/provinces/states/commonweaths where she would have lived could each make a compelling case about the revenues they would have received. During the assessment phase of the trial I would testify under oath that it was my friend’s intent to live in Boston until the next time the Red Sox won the Pennant- in other words for the rest of her natural life. Her will leaves everything to me in trust for her cats. Cat people, they are all crazy.