Citation: 2008 TCC 617
Date: 20081110
Docket: 2008-1512(IT)I
BETWEEN:
TERRENCE SCULLY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
Facts
[1]
The Appellant appealed
under the informal procedure from a reassessment disallowing medical expenses.
[2]
The particulars of the
appeal are set out in paragraphs 6, 7, 8 and 9 of the Reply to the Notice of
Appeal, which are reproduced below:
6. By Notice of Assessment dated April 16, 2007 the Minister
of National Revenue (the “Minister”) advised the Appellant that his income tax
liability for the 2006 taxation year had been initially assessed.
7. When calculating his tax liability for the 2006 taxation
year the Appellant claimed amounts totalling $16,235 as medical expenses (the
“Medical Expenses”).
8. By Notice of Reassessment dated October 16, 2007, the
Minister advised the Appellant that his claim for Medical Expenses for the 2006
taxation year had been reduced from $16,235 to $1,409, thereby disallowing
amounts totalling $14,826.
9. The Appellant filed a valid Notice of Objection for the
2006 taxation year with which he asked to increase the Medical Expenses from
$16,235 as originally claimed to $23,699. By Notice of Reassessment dated March
6, 2008, the Minister varied the reassessment by allowing an additional amount
of $220, thereby increasing the total allowable medical expenses to $1,629 and
increasing the disallowed amounts to $22,070 (the “Disallowed Amounts”). . . .
[3]
The Appellant and his
spouse are the parents of Chanel Scully, born October 27, 1995 (“Chanel”)
and Nika Scully, born October 5, 1997 (“Nika”). Both Chanel and Nika have
been certified by a medical doctor as having severe and prolonged mental or
physical impairments. The types of expenses claimed by the Appellant are
summarized in the table below:
|
Description
|
Amount claimed
|
Amount allowed
|
Amount disallowed
|
|
Travel (general:
20,222 km @ $0.39/km; to school: January to June 2006; to school: September
to December 2006)
|
9,444
|
0
|
9,444
|
|
Trip away to
visit parents
|
2,656
|
0
|
2,656
|
|
Trip to IWK, Halifax 566 km @ $0.39
|
220
|
220
|
0
|
|
Babysitting, 52
weeks @ $25/week
|
1,300
|
0
|
1,300
|
|
Replace beds due
to bed-wetting ($1,435.07 + $1,177)
|
2,612
|
0
|
2,612
|
|
House
confinement (45’ x 26’ = 1,170 sq. ft. + 200 sq. ft. – basement)
|
1,370
|
0
|
1,370
|
|
Telephone (home
phone and cellular)
|
1,083
|
0
|
1,083
|
|
House repairs
(painting)
|
1,156
|
0
|
1,156
|
|
Prescriptions,
medical premiums ($583.16, $280, $149.50, $166.39, $167.46, and $63.35)
|
1,409
|
1,409
|
0
|
|
Massage therapy
(portion not paid by Appellant’s medical insurance)
|
30
|
0
|
30
|
|
Super 8 Motel
|
91
|
0
|
91
|
|
Footwear
|
80
|
0
|
80
|
|
Volunteer Centre
of Southeastern NB (no purpose identified)
|
450
|
0
|
450
|
|
Sundry: special
food, drink, clothing and cleaning
|
1,798
|
0
|
1,798
|
|
Total
Expenses Claimed
|
$23,699
|
|
|
|
Total
Expenses Allowed
|
|
$1,629
|
|
|
Total
Expenses Disallowed
|
|
|
$22,070
|
[4]
The Minister submits
that the expenses included in the disallowed amounts totalling $22,070 were
ordinary living expenses and that none of the amounts were medical expenses for
the purpose of calculating the medical expense tax credits in accordance with
subsections 118.2(1) and 118.2(2) of the Income Tax Act (Canada) (the “Act”).
[5]
In addition, the
Respondent claims that massage therapists are not registered under the laws of
the province of New Brunswick to practise as medical
practitioners as defined in subsection 118.4(2) of the Act. The Respondent
further submits that the expense claimed in respect of massage therapy was not a
medical expense pursuant to subsection 118.2(2) of the Act as this
expense was not an amount paid to a medical practitioner in respect of medical
services.
[6]
The Appellant was the
only party to testify at trial. The Appellant testified that his daughter Nika
was diagnosed with Niemann-Pick Type C disease (“NPC”). He stated that NPC is a
very rare disease and that there are only about 500 cases diagnosed worldwide.
NPC patients are not able to metabolize cholesterol and other lipids properly
within their cells. The Appellant testified that NPC has been initially diagnosed
as a learning disability, as mild retardation and as delayed development of
fine motor skills.
[7]
Chanel, the older of
the two daughters, was diagnosed with autism. Autism is part of a group of pervasive
developmental disorders characterized by impairments in social interaction and in
verbal or non-verbal communication skills, and often leads to repetitive
behaviour. The Appellant testified that Chanel is often violent, reacting
negatively to strange sights or sounds, and has on a number of occasions hit
people who have come to her aid in situations of emotional crisis. He further
testified that Chanel does not like leaving the security of the family
residence. She has speech and learning problems and has been barred from taking
the school bus for safety reasons.
[8]
Nika faces a host of
similar problems. She has speech, learning and sleeping difficulties. She
cannot take the school bus for both safety and health reasons. The Appellant
testified that Nika is destructive by nature and breaks things constantly. She
cannot walk properly and in many cases she has to crawl or use a wheelchair.
The Appellant testified, and the Court has no reason to doubt, that his
children require 24 hours a day, seven days a week care, thus placing a tremendous
emotional and financial burden on both parents.
[9]
The Appellant explained
that he and his spouse were advised by a medical specialist that they should
take at least two vacations a year without the children to allow them to cope
with the emotional burden of providing constant attendant care to their
children. He alleged that the government was willing to put the children into
foster homes on weekends at a cost of roughly $300 per day per child to give him
and his spouse a break from a very stressful life.
[10]
The Appellant pointed
out that the $2,656 claimed represented expenses incurred in respect of the
vacations taken by him and his spouse in order to allow them to “disconnect” as
he put it, for a minimum of seven days out of a 365‑day‑a‑year
full-time 24‑hour-a-day job of caring for his special needs children. He
found it unfair that the government would not allow him and his spouse to claim
the expense of a one‑week vacation twice a year as compensation for
providing attendant care to their children in view of the considerable savings
achieved by virtue of their refusal to avail themselves of the offer of third-party
foster care on weekends. He alleges that without these two short breaks he and his
spouse would be unable to cope with the stress of raising two special needs
children and that the costs to the government would likely be much higher if
they became unable to provide proper care.
[11]
The Appellant explained
that $7,885 out of the total travel expenses related to the costs of operating
the family van, which was the only means of transportation that he could use to
carry his daughter Nika’s wheelchair. The van is often used to take both of his
daughters swimming at the beach or at the pool located on the property of the Appellant’s
brother in the neighbouring county.
[12]
The Appellant testified
that his daughter Chanel has been found by her school to be too impulsive and
aggressive to take the bus. The school also advised the Appellant to arrange
for school transportation for his daughter Nika himself because her physical
condition would pose a safety problem in the event of an accident. The Appellant
claimed a total of $1,559 in respect of travel expenses incurred to take his
daughters to school.
[13]
The Appellant claimed
$1,300 as child care expenses for babysitting. The Respondent did not contest
the quantum of the expenses nor their purpose, but alleged that they were also
claimed by the Appellant’s spouse in her tax return and had been allowed. The
Appellant alleged that he was unaware of the fact that his spouse had claimed
the same expenses in her return.
[14]
The Appellant testified
that he had had to replace the mattresses of both of his children’s beds, for a
total expense of $2,612, due to constant bed-wetting.
[15]
The Appellant did not
provide details with respect to the house confinement expenses that were
claimed. The Court understood that this was an arbitrary amount chosen by the Appellant
to represent the time spent by him and his spouse looking after their children and
was compensation for the lack of a meaningful social life in the community.
[16]
The Appellant claimed
the costs of cellular phones as an expense in his return as it was extremely
important that either the girls or people taking care of the girls during or
after school hours be able to reach him or his spouse at all times.
[17]
The amount claimed by
the Appellant for house repairs represented the costs of repainting various
rooms in the principal residence. The Appellant testified that the paint was
chipping and both girls put the paint chips in their mouths, which is extremely
dangerous from a health standpoint.
[18]
The Appellant claimed
that he paid the Volunteer Centre of Southeastern New Brunswick a total of $450
for three to six hours per week of assistance. The Minister disallowed the
expense because a similar amount had been claimed by the Appellant’s spouse.
The Appellant claimed that he was unaware of this fact.
[19]
The Appellant testified
that the sundry expenses totalling $1,798 referred to as being for special
food, drink, clothing and cleaning were incurred in respect of special footwear
for his daughter Nika, special food because she suffered from constipation,
activity equipment, dry cleaning and expenses incurred at the activities
centre.
Analysis
[20]
The Act provides
relief to taxpayers in two forms with respect, inter alia, to children
with special needs.
[21]
The first type of
relief is provided for under section 118.3 of the Act in the form of a
special credit in respect of individuals with mental and physical impairments that
cause restrictions to their ability to perform basic activities of daily living
(the “DTC”).
[22]
The DTC provides tax
relief in the form of a lump sum credit in recognition of non-discretionary
expenses that a taxpayer may incur, for example, with respect to dependent
children suffering from mental or physical impairments. The tax policy
underlying this provision appears clear. Dependents with special needs place an
additional financial burden on themselves or related caregivers. In view of the
large scope of physical and mental impairments that can affect taxpayers’ well‑being,
Parliament has adopted the approach of a lump sum credit based on a specified
percentage of a base amount of notional expenses. Parliament has assumed that
this minimum amount of expenses would be incurred in respect of individuals
suffering from physical or mental impairments.
[23]
Obviously, the Appellant
feels that the bar has been set too low in the present case. The Court is very
sympathetic to the Appellant’s position and can only begin to imagine the
financial and psychological hardship that the Appellant and his spouse face on
a daily basis in choosing to personally provide care to their children rather than
relying on less satisfactory publicly funded third-party care.
[24]
The other form of tax
relief that often applies to cases like the present is the medical expense tax
credit (“METC”) provided for in section 118.2 of the Act. The approach
adopted for the METC is the opposite of the approach taken with respect to the
DTC. For the purposes of the METC the taxpayer must first establish that
expenses have been incurred in respect of the taxpayer, a spouse, a common-law
partner or a child under the age of 18. However, unlike the DTC, which is based
on a credit for a notional amount of expenses, in the case of the METC the
expense must meet the specific conditions set out in one of the paragraphs of
subsection 118.2(2).
[25]
With the greatest of
sympathy for the Appellant’s situation, I am forced to conclude that the
expenses that have been disallowed by the Respondent are not of the type that
can be deducted under subsection 118.2(2). For example, the travel and
transportation expenses claimed by the Appellant and disallowed by the
Respondent are not of the type described in paragraphs 118.2(2)(g) and (h).
Both of these provisions refer to travel to obtain medical services not
available in the locality of the patient’s residence. To be considered as
falling under paragraph 118.2(2)(g), the medical services must be
obtained at a location that is not less than 40 kilometres from the
locality where the patient lives. In addition, where the medical services are provided
at a location at least 80 kilometres from the patient’s locality,
reasonable travel expenses in addition to transportation expenses incurred in
respect of the patient and an accompanying attendant may be deducted under
paragraph 118.2(2)(h).
[26]
In the present case,
the Appellant argued that some of the travel expenses were incurred in respect
of both of his children to drive them to swimming which was ordered by their
physician as a therapy that could help their conditions. The Appellant alleged
that a medical service could include swimming if recommended by a physician to
improve or stabilize the patient’s health. Counsel for the Respondent took a
narrower view of the term “medical services”, insisting that the type of medical
services in question must be listed in paragraph 118.2(2)(a) of the Act.
I note that paragraph 118.2(2)(a) does not set out a definition of “medical
services”, but simply defines the type of expenses that are eligible for
inclusion under subsection 118.2(1). Therefore, without deciding this issue, I
find that the Appellant’s position clearly has some merit. However, the Appellant
has failed to establish on a balance of probabilities that the swimming activities
that his children benefited from were obtained in a locality that was at least
40 kilometres from their home, or at least 80 kilometres from their
home for the purposes of paragraph 118.2(2)(h). The Appellant also
failed to establish that there were no swimming facilities available in the
locality of his home or at a closer distance to his home. Therefore, the Appellant
must fail in his attempt to bring these expenses under paragraphs 118.2(2)(g)
and (h) of the Act. As these expenses related to the operation of
a van rather than to costs incurred for the acquisition or adaptation of a van,
they could not fall within the scope of paragraph 118.2(2)(l.7).
[27]
As mentioned earlier,
the other expenses claimed by the Appellant and disallowed by the Minister do
not fit within any of the other paragraphs of subsection 118.2(2) of the Act.
For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of November 2008.
“Robert J. Hogan”
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