Mullin v. R., [1999] 2 CTC 2750, 99 DTC 748

Sarchuk T.C.J.:

This is an appeal by Sheila D. Mullin from an assessment of tax with respect to her 1995 taxation year. In that year relying on the provisions of paragraph 118.2(2)(g) and subsection 118.2(4) of the Act, she claimed the amount of $4,907.35 as medical expenses of which the sum of $1,361.25 represented vehicle expenses. In assessing, the Minister of National Revenue (the Minister), reduced this claim to $411.40.

At the commencement of the trial the parties filed an Agreed Statement as to Facts which reads as follows: [1]

The Appellant and the Respondent do hereby agree with each other in connection with the truth and accuracy of the following facts and statements:

1. The Appellant, Sheila D. Mullin (having Social Insurance Number [number omitted]) is an individual resident of Swan River, Manitoba.

2. The Appellant has submitted a claim to the Respondent on account of medical expenses with respect to her 1995 taxation year (for medical expenses in connection with the period January 1, 1995 to December 31, 1995) in the amount of $4,907.35.

3. The Respondent has allowed medical expenses for the Appellant in the amount of $4,288.74.

4. The difference between the position of the Appellant and the position of the Respondent in connection with the medical expense claim relates solely to the item respecting “travel-use of personal vehicle”:

(a) The Appellant has made a medical expense claim of $1,361.25 in connection with this item ($0.30 per kilometre);

(b) The Respondent has allowed only $604.67 in connection with this item ($0.16 per kilometre).

5. The amount per kilometre that the Respondent has suggested as being reasonable is $0.16 per kilometre, being the amount that the Respondent is prepared to allow in connection with “travel-use of personal vehicle”.

6. The Appellant and Respondent agree that the travel in question related to transportation of the Appellant and/or the children of the Appellant from the locality where the Appellant dwells to visit medical persons in circumstances where:

(a) The amount of travel required was at least 40 kilometres;

(b) Substantially equivalent medical services were unavailable within the Appellant’s locality;

(c) The Appellant was taking a reasonably direct travel route and travelled the kilometres claimed along that route; and

(d) It was reasonable for the Appellant to travel to that place for medical services.

These are the requirements of paragraph 118.2(2)(g) of the Income Tax Act (the “Act”). The Appellant and Respondent agree that these requirements have been satisfied.

7. The Appellant’s claim for the use of the vehicle is made pursuant to subsection 118.2(4) of the Act.

Evidence was also adduced from Norma Marr, an appeals officer with Revenue Canada. The Appellant’s file was assigned to her in the normal course and as a result of her review, the Appellant’s claim for vehicle expenses was reduced to $0.14 per kilometre and two oil changes. Her decision was based primarily on a study conducted by Runsheimer of Canada, an organization which performs analyses of vehicle operating costs in 12 cities in Canada for, inter alia, the Canadian Automobile Association. According to this study, $.1 l'/2 per kilometre was the appropriate operational costs, however, Ms. Marr allowed $.03 per kilometre more than the study suggested because the Appellant utilized a van rather than a car. For the same reason, she also allowed the additional oil changes. Ms. Marr conceded that the reference to operating costs in the study reflected costs of fuel, oil, tires and maintenance but did not take into account depreciation, replacement of parts and wear and tear.

The Court also had before it a Treasury Board of Canada Travel Directive; the Manitoba Government Employees’ Master Agreement and a copy of The Town of Swan River By-law. [2] The Treasury Board Travel Directive sets out the federal government rates which currently are $.3472 per kilometre for the first 6,500 kilometres. The MGEU rates found in Exhibit A-3 allows, for employees travelling south of the 53rd parallel, $.30.4 per kilometre for the first 10,000 kilometres. Last, The Town of Swan River Bylaw provides that its officers and employees are to be reimbursed at the rate of $.30 per kilometre. The Appellant is a resident of Swan River.

The relevant sections are 118.2(2)(g) and 118.2(4) of the Act, as fol- lows;3 [3]

118.2(2) For the purposes of subsection (1), a medical expense of an individual is an amount paid

(g) to a person engaged in the business of providing transportation services, to the extent that the payment is made for the transportation of

(i) the patient, and

(ii) one individual who accompanied the patient, where the patient was, and has been certified by a medical practi- tioner to be, incapable of travelling without the assistance of an attendant

from the locality where the patient dwells to a place, not less than 40 kilometres from that locality, where medical services are normally provided, or from that place to that locality, if

(iii) substantially equivalent medical services are not available in that locality.

(iv) the route travelled by the patient is, having regard to the circumstances, a reasonably direct route, and

(v) the patient travels to that place to obtain medical services for himself or herself and it is reasonable, having regard to the circumstances, for the patient to travel to that place to obtain those services;

118.2(4) Where, in circumstances in which a person engaged in the business of

providing transportation services is not readily available, an individual makes use of a vehicle for a purpose described in paragraph (2)(g), the individual or his legal representative shall be deemed to have paid to a person engaged in the business of providing transportation services, in respect of the operation of the vehicle, such amount as is reasonable in the circumstances.

Delivered orally from the Bench at Winnipeg, Manitoba, on January 14, 1999

1 think in the course of our discourse, Mr. Bouvier, I expressed fairly clearly my perception of how the section should be interpreted. It is basically that in the case of a taxpayer who uses his or her own vehicle because transportation services are unavailable, the relevant subsection, 118.2(4), deems that the taxpayer has paid a reasonable amount to a person providing those services. That is the only way I can see to read that section if it is to make any sense.

The question then becomes what is a reasonable amount. In this particular case, we have the evidence of the appeals officer who utilized a particular study to determine that $.11 per kilometre properly reflected the running expenses or operating expenses of a vehicle and, then because in this case the Appellant drove a van rather than a car, added a further $.03 cents per kilometre together with a subsidiary amount for two oil changes. In my view, that amount is not a reasonable amount which the taxpayer would have paid to a person providing the services referred to in paragraph 118.2(2)(g).

The next question to be answered (and there is a bit of a shortage of evidence as to what the costs of the provision of such transportation might be) is whether the amount asserted by the Appellant is reasonable or not. I see no basis upon which I can distinguish the deemed payment provided for by subsection 118.2(4) from a payment to a federal servant employed by Revenue Canada or by any other department, or to a judge travelling on business. In this context, I note that $.3472 per kilometre is considered to be a reasonable expense incurred by such person when required to use his vehicle for government business.

I do not dispute that this takes into account the use of the vehicle in its full context, that is not just operating expenses, but the cost of insurance, the cost of maintenance, the cost of repairs and so forth, but these are an appropriate charge.

I note, for example, that in northern communities, it is accepted (and I am speaking on the basis of previous cases I have heard) that the rates are increased because of the additional wear and tear which occurs given their particular weather conditions and so forth. That makes sense. It is consistent with what I believe to be an appropriate assessment of the reasonable costs.

For these reasons, abbreviated though they are, I have concluded that the Appellant is entitled to her claim of $.30 per kilometre as being a reasonable amount in the circumstances. The appeal is allowed, with costs.

Appeal allowed.