31 August 2006 External T.I. 2006-0190451E5 - Upper Limit Of D In Subsection 118.2(1)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What is the upper limit of the description in D in the formula for calculating the medical expense tax credit in subsection 118.2(1) for the supporting children who each contributed $15,000 towards the full time care of their mother in a long-term care facility.

Position: Using the 2006 taxation year as an example and assuming the expense qualifies under paragraph 118.2(2)(d), the upper limit would be the lesser of:

a). $10,000 and,
b). $15,000 minus the lesser of
i. $1,813 and
ii. 3% of the income of the mother

If we assume that the mother's income for the 2006 taxation year is nil, the upper limit of the description in D in subsection 118.2(1) for each paying child for 2006 would be $10,000.

Reasons: Based on the description of D in subsection 118.2(1).

								D Tiu
XXXXXXXXXX 							(613) 957-8961
								2006-019045
August 31, 2006

Dear XXXXXXXXXX:

Re: Upper Limit Of The Description In "D" In Subsection 118.2(1) of the Income Tax Act ("the Act")

We are writing in response to your June 8th, 2006 inquiry on the above subject and further to our subsequent telephone discussions (XXXXXXXXXX/Tiu). You indicated that four siblings contributed equally towards the total cost of $60,000 for full time care of their mother in a long-term care facility. You also indicated that the cost qualifies under paragraph 118.2(2)(d) of Act, and that the mother is eligible for the Disability Tax Credit. You wanted to know what is the upper limit of the description in D in the formula for calculating the medical expense tax credit in subsection 118.2(1) for the supporting children who each contributed $15,000 towards the full time care of their mother in a long-term care facility.

The particular situation in your letter appears to relate to a factual one, involving specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to provide the following general comments.

Amounts that an individual has paid for the cost of full-time care in a nursing home for a patient qualify under paragraph 118.2(2)(d) as medical expenses if the patient, due to lack of normal mental capacity, is and apparently will continue to be dependent upon others for personal needs and care. The term "nursing home" is not defined in the Act and, therefore, in determining if a particular facility qualifies as a nursing home, we rely on the ordinary meaning of the term. We are of the view the facility must have the equivalent features and characteristics of a nursing home in order to qualify as a nursing home. In our view, the meaning of the phrase "full-time care in a nursing home" is not intended to place a requirement of a minimum time spent caring for the patient, but rather it implies the constant care and attendance required by an individual by reason of the injury, illness or affliction of the individual. To provide such care, it is our view that there must be appropriately qualified medical personnel in attendance in sufficient numbers on a 24-hour basis.

In response to your query, the 2006 upper limit of the description in D in subsection 118.2(1) for each supporting child who contributes $15,000 towards the cost of their mother's full time care in a nursing home qualifying under paragraph 118.2(2)(d), would be the lesser of:

• $10,000 ^*1 and,
• $15,000 minus the lesser of
• $1,813 ^*2 and
• 3% of the income of the mother

^*1 The amendment increasing this amount from $5,000 to $10,000 and applicable to the 2005 and subsequent taxation years, was included in Bill C-13, Budget Implementation Act, 2006 that received royal assent recently on June 22nd, 2006.

^*2 Subsection 117.1(1) provides that the above noted $1,813, applicable for the 2006 taxation year, is indexed for inflation, and for 2005, this amount is $1,844.

If we assume that the mother's income for each of the 2005 and 2006 taxation years is nil, the upper limit described in D in subsection 118.2(1) for each paying child for each of these years would be $10,000.

These comments represent our opinions of the law as it applies generally, and as indicated in paragraph 21 of Information Circular 70-6R5, are not binding on the Department. Nevertheless, we hope that our comments will be of assistance to you.

Yours truly,

Phil Jolie
Director
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch