Ostroff, Fair and Company
*Ostroff, Fair and Company>>>Canada Taxes

Can a $100,000 be a itemized deduction, if given for a reward?


This lady son was killed and she gave the police station $100,000 reward to the informant. She wants to know if she can itemized the $100, 000 on her tax returns?

I'm an accountant. I doubt it. It's not a charitable contribution and it's not a legitimate business expense.
Are you saying she gave the money to the police dept? Did she get any kind of receipt or letter from the police department?
The basic principal behind a person's ability to deduct an amount from income reported for income tax purposes is that the expenditure has to be laid out for the purpose of earning taxable income. In order for any other payment that does not meet this basic principle to be deducted there has to be a specific legislative allowance. The ability to deduct charitable donations is a case in point. These payments are not laid to earn income however the Canadian Income Tax Act permits such deductions within certain limits.

The only way reward money could possibly become an income tax deduction is if you could link this payment with a subsequent source of taxable income.

Although this is an outlandish analysis I think it re-enforces the point. Say for instance the reward resulted in an arrest which permitted the person providing the reward money with the ability to successfully sue the perpetrator. We will also assume for the purposes of this analysis that the money received from the lawsuit is subject to income tax (which it is not). If such was the case, then the reward would be a deduction in computing how much of the money received as a result of the legal action was subject to tax.

In conclusion, the short answer to your question is unfortunately there is no income tax relief for such payments.

Please express my condolences to your friend I can't imagine how difficult it must be to lose a child in this way.
TIM gave you the best answer and I agree with him.
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