Disability Tax Credit (DTC) and Tax Refunds

[Greg Best]

I’m interested in hearing from LITs, particularly those in Alberta, Saskatchewan, and Nova Scotia, how they are treating Income Tax refunds, particularly those resulting from DTC applications.

The Chomistek decision (https://canlii.ca/t/hsg7p) in Alberta, which has been referred to in several subsequent decisions, including Saskatchewan and Nova Scotia, suggests that “certain tax refunds are to be included in “property” section 67, and certain tax refunds are to be included in “income” in section 68”. The Court further states: “if the tax refund was not claimed until after the bankrupt has been discharged, (the bankrupt) need only account for the portion that was “earned” during the bankruptcy”. IMO it’s a strange decision, with real potential problems for all tax refunds, and not just those resulting from a DTC.

Is anyone following this decision and treating income tax refunds, including those from DTC, from the year of, or prior years, as anything other than property pursuant to Section 67? Is there is more than one “type” of Income Tax Refund? Do some Income Tax refunds for the year of, or prior years, not vest in the trustee?

I treat all tax refunds (and I believe there is only only one type of tax refund) from the year of, or prior years, as property pursuant to Section 67. A position supported (for now) by the BC Courts, and the OSB!

[Author]

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