30 November 1994 External T.I. 9421975 - REIMBURSEMENT OF MEDICAL EXPENSES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

The issue is whether an amount awarded in respect of future care (a personal injury damages award is involved) can be regarded as being a reimbursement with respect to subparagraph 118.2(3)(b) of the Income Tax Act.

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

The wording of 118.2(3)(b) is considered to relate to the type of situation where repayment is made for a medical expense that has been incurred.
		                       		  		         942197
XXXXXXXXXX	         M. Eisner

Attention: XXXXXXXXXX

November 23, 1994

Dear Sirs:

Re: Damages Award for Personal Injury - Medical Expenses

This is in reply to your letter of August 23, 1994 in which you requested our views on whether an amount awarded to an individual in respect of future care as part of a damages award for personal injuries would be regarded as being a reimbursement for the purposes of determining the individual's medical expense tax credit under section 118.2 of the Income Tax Act (the Act).

You have set out circumstances in your letter that relate to an actual fact situation. In order to obtain the Department's position on the tax consequences thereof, you should submit the relevant details to your local District Taxation Office. We are, however, providing you with the following general comments.

Our Comments

You are concerned with the type of situation where an individual has been awarded various amounts which included a lump sum in respect of future care that the individual would likely require during his or her lifetime. The amounts were awarded by a court as a consequence of personal injuries sustained by the individual.

Section 118.2 of the Act sets out the rules under which an individual may be entitled to claim a medical expense tax credit. For the purposes of computing a medical expense tax credit, part of paragraph 118.2(3)(b) of the Act provides that "there shall not be included as a medical expense of an individual any expense for which the individual ... has been or is entitled to be reimbursed". With respect to this excerpt, it is our general view that a lump sum awarded in respect of future care costs would not have any effect on whether the individual in the above situation would be entitled to claim a medical tax credit. (i.e., the future care costs are not considered to have been reimbursed as a consequence of the sum awarded). We would also consider this view to be applicable in respect of the above situation if the award had arisen as a consequence of a decision rendered by a jury in a court of law or an out-of-court settlement.

As a further general comment, we note that it seems to us that, normally, such an award would not be set out in a highly detailed manner since it would be difficult to account for a number of factors such as technological change.

We trust that our comments will be of assistance to you.

Yours truly,
P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch