Citation: 2008 TCC 497
Date: 20080908
Docket: 2007-3535(IT)I
BETWEEN:
GARY HENDRICKS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Appeal
heard and judgment delivered orally from the bench on August 15, 2008,
in Nanaimo,
British Columbia.)
Paris, J.
[1]
This is an appeal from
the Minister’s disallowance of a medical expense tax credit (“METC”) of $10,875
claimed by the Appellant under subsection 118.2(1) of the Income Tax
Act for his 2005 taxation year.
[2]
The amount claimed is
the cost of replacing carpets with hardwood flooring at the Appellant’s
residence. The Minister held that the amount did not qualify as a medical
expense under subsection 118.2(2) of the Act, and in particular
under subparagraph 118.2(2)(l.2) (i) and (ii) which reads as
follows:
(2) Medical expenses. For the
purposes of subsection (1), a medical expense of an individual is an amount
paid
(l.2) for reasonable expenses relating to renovations or
alterations to a dwelling of the patient who lacks normal physical development
or has a severe and prolonged mobility impairment, to enable the patient to
gain access to, or to be mobile or functional within, the dwelling, provided
that such expenses
(i) are not of a type that would typically be expected to increase
the value of the dwelling, and
(ii) are of a type that would not normally be incurred by persons
who have normal physical development or who do not have a severe and prolonged
mobility impairment;
[3]
The assumptions relied
on by the Minister in disallowing the claim are set out in paragraph 8 of
the Reply:
8. In reassessing and in confirming that reassessment of the
Appellant, the Minister relied on the following assumptions of fact:
a) Sandra Hendricks (“Sandra”) was the Appellant’s spouse during the
2005 taxation year;
b) the Appellant incurred expenses totalling $10,674 for the
purchase and installation of wood floors for his residence between July and
October of 2005;
c) neither the Appellant nor Sandra lacked normal physical
development nor did either have a severe and prolonged mobility impairment
during the 2005 taxation year;
d) the installation of the hardwood floor in the Appellant’s
dwelling was an alteration of a type that would typically be expected to
increase the value of that dwelling; and
e) the installation of the hardwood floor in the Appellant’s
dwelling was an alteration of a type that would normally be incurred by persons
who have normal physical development or who do not have a severe and prolonged
mobility impairment.
[4]
At the hearing the
Respondent conceded that Sandra Hendricks, the Appellant’s spouse, lacked
normal physical development and had a severe and prolonged mobility impairment
during the 2005 taxation year. The evidence showed that Ms. Hendricks suffered
from severe asthma.
[5]
In addition the
Respondent did not take issue with the Appellant’s evidence that the removal of
the carpeting and installation of the hardwood flooring was done on the
recommendation of Ms. Hendricks’ doctor, nor did the Respondent dispute
that the flooring replacement resulted in a dramatic improvement in
Ms. Hendricks’ condition.
[6]
The only issue in the
appeal is whether the expense claimed by the Appellants meets the conditions
set out in subparagraph 118.2(2)(l.2) (i) and (ii) of the Act.
Those provisions require that, in order for an expense relating to renovations
or alterations to a dwelling to qualify for a METC, that it not be of a type
that would typically be expected to increase the value of the dwelling, and
that it be of a type that would not normally be incurred by persons who have
normal physical development or who do not have a severe and prolonged mobility
impairment. Both of these conditions must be met in order for an expense
to be deductible.
[7]
The Minister assumed in
reassessing that the installation of hardwood flooring was a type of renovation
normally done by persons with normal physical development or who do not have a
severe or prolonged physical development. As I explained to the Appellant at
the outset of the hearing, the assumptions made by the Minister are deemed to
be true until disproven by an appellant. The Appellant agreed in cross-examination
that installation of new hardwood flooring was often done by people without a
lack of physical development or without a severe or prolonged mobility
impairment. I am therefore unable to find that the condition in
subparagraph 118.2(2)(l.2)(ii) was met.
[8]
I also find that the
Appellant has not disproven the assumption made by the Minister that the
installation of the hardwood flooring was an alteration that would typically be
expected to increase the value of the dwelling.
[9]
Once again, the onus is
on the Appellant to disprove this fact. It would have been up to him to bring
some evidence (such as evidence of a real estate professional or expert) to
contradict the Minister’s assumption. In the absence of any such evidence I am
unable to find that the condition in subparagraph 118.2(2)(l.2)(i)
was met. I would also add that, as a matter of common sense, it would seem that
the installation of new hardwood floors in the place of 23 year old
carpets in this case, could typically be expected to increase the value of a
dwelling.
[10]
I agree with counsel
for the Respondent that the conditions in issue were added to
paragraph 118.2(2)(l.2) in 2005 in order to narrow the type of home
renovation expenses that would be eligible for a METC. The amendment was in
response to previous jurisprudence of this Court which had allowed taxpayers to
claim a METC for the installation of hardwood floors and hot tubs where those
installations were found to have been done on the advice of a physician to
ameliorate the circumstances of a person with a mobility impairment or who
lacked normal physical development. The purpose of the amendments is clear from
the technical notes and Budget papers referred to by counsel.
[11]
The Appellant claims
that renovations carried out in order to widen doorways and hallways would also
typically be expected to increase the value of a dwelling yet according to the
Budget papers referred to by the Respondent’s counsel their cost is allowed as
a medical expense by the CRA. However, the question of whether such renovations
expenses qualify for a METC is not before me. I can only decide the appeal on
the basis of the facts before me.
[12]
The Appellant also says
that Ms. Hendricks’ doctor recommended the removal of the carpeting prior
to February 22, 2005, which was before the effective date of
subparagraph 118.2(2)(l.2)(i) and (ii). This is not material since
the amendments were made applicable to any expenses incurred after
February 22, 2005 and it was admitted that the expenses in this case were
incurred in July and October 2005. They are therefore subject to the new
provisions.
[13]
For all of these
reasons, the expenses claimed do not qualify as medical expenses under the Act
and are not eligible for a METC. The appeal is dismissed.
Signed at Ottawa, Canada, this 8th day
of September 2008.
“B.Paris”
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