Income Tax Severed Letters - 2011-03-18

Principal Issues: Whether the costs of Natural Health Products are eligible for the medical expense tax credit (METC) and may be covered by a PHSP.

Position: Generally, no unless qualify under 118.2(2)(k) which allows the cost of insulin, oxygen, liver extract injectible for pernicious anaemia or vitamin B12 for pernicious anaemia as prescribed by a medical practitioner. Only drugs that can lawfully be purchased only by prescription (or only with the intervention of a medical practitioner) will qualify under 118.2(2)(n). However, it is a question of fact whether a particular drug may lawfully be acquired only by prescription (or only with the intervention of a medical practitioner). Need to look at both federal and provincial/territorial legislation and regulations in order to make that determination. If the cost of the drug would not normally have otherwise qualified for METC, then does not qualify as a medical expense covered by a PHSP.

Reasons: Wording of 118.2(2)(n) and paragraph 4 of IT-339R2

Principal Issues: Whether a group of investors operating under an agreement entitled a joint-venture agreement are a joint venture or a partnership.

Position: Question of fact.

Reasons: IT-90 sets out a number of criteria to help determine whether an operation is a joint venture or a partnership, but no one factor is decisive.

Principal Issues: Whether a sleep evaluation study paid to a private sleep clinic qualifies as medical expenses for purposes of the METC

Position: Yes

Reasons: A sleep evaluation study meets the conditions of paragraph 118.2(2)(o) which includes diagnostic procedures for maintaining health.

Principal Issues: Whether the cost of: (1) An in-vitro fertilization process performed outside Canada qualify as medical expenses, and whether (2) The related travel costs for an in-vitro fertilization performed outside Canada qualify as medical expenses.

Position: (1) Yes (2) Yes if the conditions of paragraph 118.2(2)(g)(v) are met.

Reasons: (1) Amounts paid to a medical practitioner or a licensed hospital qualify as a medical expense under paragraph 118.2(2)(a) of the Act. (2) Transportation expense to travel not less than 40 km to obtain medical services qualify under paragraph 118.2(2)(g) of the Act and other travel expenses qualify under paragraph 118.2(2)(h) of the Act if the individual travels not less than 80 km to obtain medical services and it is reasonable for the individual to have done so, the route taken was reasonably direct and substantially equivalent medical services were not available in the individual's locality.

Principal Issues: 1) Are specific disability related expenses such as education fees, gym memberships, home repairs, etc. allowed for purposes of the medical expense tax credit? 2) Can a person income split their salary with his spouse to compensate her for talk therapy treatment she provides at home to their disabled son?

Position: 1) No; 2) No

Reasons: Only expenses which are listed in subsection 118.2(2) of the Act qualify as medical expenses. Therapy expenses only qualify if the therapy is received by a person who qualifies for the disability tax credit under section 118.3 of the Act, and the therapy is provided by someone who is not the spouse or common-law partner of the person who is claiming the expense and who is 18 years of age or older, when the amounts are paid. The therapy has to be prescribed and supervised by a medical doctor, a psychologist (for a mental impairment), or an occupational therapist (for a physical impairment).

Principal Issues: Clarification requested in respect of the interaction of paragraphs 88(1)(d.2) and (d.3) in the context of a post-mortem bump planning strategy.

Position: Clarification provided.

Reasons: In accordance with the Act and our previous positions.

Principal Issues: Does the redemption of travel reward points result in a taxable benefit where the points were accumulated on the personal credit card of a previous employee/shareholder through business travel paid for by the corporation?

Position: No

Reasons: Provided all of the criteria listed in ITTN #40 are met, the travel reward points will not result in a taxable benefit.

Principal Issues: Whether the waiver of monthly condo fees in exchange for performing bookkeeping duties results in income to be reported on a T4 slip.

Position: It is a question of fact, but most likely yes.

Reasons: If the benefit to be provided in exchange for the services was known at the time the treasurer accepted the office, the amount of the condo fees waived would be income from an office.

Principal Issues: Whether interest is exigible when losses are carried back.

Position: Yes.

Reasons: S. 161(7)(b) provides that interest continues to accrue until 30 days after the request to carry back losses is made.

Principales Questions: A) La question est de savoir si un paiement à titre d'ajustement salarial rétroactif pourrait bénéficier des règles d'étalement d'un paiement rétroactif prévues aux articles 110.2 et 120.31 de la Loi de l'impôt sur le revenu?
B) Vous désirez également savoir sur quels feuillets doivent apparaître les intérêts payés.

Position Adoptée: A) Non; B) Les intérêts versées sur un paiement rétroactif de salaire sont présentés sur des feuillets T5.

Raisons: À notre avis, les employés ne pourront bénéficier du traitement prévu à l'article 110.2 compte tenu que les conditions ne sont pas respectées. Le paiement des sommes versées dans le cas présent n'est pas un " montant admissible " aux fins du paragraphe 110.2(2) puisqu'il n'est pas reçu en exécution d'une ordonnance ou d'un jugement compétent, d'une sentence arbitrale ou d'un contrat par lequel le payeur et le particulier mettent fin à une procédure. Les ententes conclues donnant droit aux ajustements salariaux rétroactifs visées par la présente, font suite à une constatation par les parties de la nécessité de revoir la structure salariale et à des négociations. Il s'en est suivi des ententes entre l'employeur et les représentants des divers comités d'équité salariale.

Principales Questions: Un contribuable qui a une activité quotidienne de jouer à des jeux de hasard sur Internet, par le biais de casinos virtuels, exploite-t-il une entreprise au sens de la Loi de l'impôt sur le revenu?

Position Adoptée: Question de fait. Généralement de telles activités ne constitueront pas une source de revenus.

Raisons: Loi de l'impôt sur le revenu.

Principal Issues: Whether telework meets the requirements on T2200 form - Declaration of Conditions of Employment of requiring an employee to work from home under a contract of employment.

Position: Question of fact, but in this situation probably yes

Principal Issues: Whether a corporation listed on the TSX Venture Exchange (Tier 2) is a public corporation

Position: Yes

Reasons: The TSX Venture Exchange (Tier 2) is a designated stock exchange.

Principal Issues: Would wind turbines qualify for Investment Tax Credits

Position: No

Reasons: Such property would not be prescribed machinery and equipment per regulation 4600(2) for the purposes of the definition "qualified property" in subsection 127(9).

Principal Issues: Whether a particular iontophoresis device that has been prescribed by a doctor for the treatment of hyperhidrosis is a qualifying device for the purposes of the medical expense tax credit.

Position: Yes.

Reasons: The particular iontophoresis device is considered a qualifying electrotherapy device under paragraph 5700(z.2) of the Regulations.

Principal Issues: Whether an individual and his spouse who are cohabitants in one room in a nursing home are considered involuntarily separated and both eligible for the Ontario Senior Homeowners Property Tax Credit (the Credit).

Position: It is a question of fact whether individuals are separated or residing with their spouse. Where an individual and his/her spouse share one room in a nursing home, the individual has a qualifying spouse. The spouses are not considered living separate and apart and only one can claim the credit.

Reasons: Legislation.

Principal Issues: 1. Who can claim a share of the qualifying expenditures incurred for common areas of a strata where there is a change in ownership of the strata unit during the HRTC eligibility period - the previous owner or the current owner?

2. How are the qualifying expenditures allocated between the previous owner and the current owner of the unit, if a unit changes its owners during the HRTC eligibility period?

Position: 1. Both, the previous owner who sold the unit and the current owner who bought the unit, may claim their share of the qualifying expenditures incurred by the strata council while they were the owner of the strata unit, providing all of the HRTC requirements are otherwise met.
2. Generally, the qualifying expenditures incurred for common areas are allocated to strata unit owners based on the governing documents and/or special resolutions of the strata corporation.

Reasons: 2009 Federal budget statements; Section 118.04 of the ITA

Principal Issues: Client is requesting clarification on when capital gains is applicable on the sale of one of two principal residences resulting from a marriage.

Position: A question of fact

Reasons: Legislation and previous position

Principal Issues: Comments on currency transactions, margin accounts and superficial loss rules

Position: Comments provided

Reasons: IT-95R, par 13