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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Could paragraph 118.2(2)(l.2) include the cost of a hot tub or just alteration costs to a dwelling to install the hot tub?
Position: Paragraph 118.2(2)(l.2) could include the alteration costs to a dwelling to install the hot tub but not the cost of the hot tub itself
Reasons: It is our long-standing position that since a hot tub is not a prescribed medical device or equipment pursuant to Income Tax Regulation 5700, the cost a hot tub is not considered a medical expense for the purposes of the medical expense credit in subsection 118.2(1) of the Act. It is our opinion that the "costs of the alterations" should not be extended to include the cost of the hot tub for the purpose of paragraph 118.2(2)(l.2) of the Act.
XXXXXXXXXX 2002-012054
Shaun Harkin, CMA
March 27, 2002
Dear XXXXXXXXXX:
Re: Technical Interpretation Request: Medical Expense
This is in reply to your letter of January 10, 2002 and further to our letter of January 2, 2002 wherein you ask the following questions:
1) In the decision of the Federal Court of Appeal in the case of Her Majesty the Queen v. Beth Gibson did the "costs of the alterations" of the residential structure include the cost of purchasing the hot tub and all the renovations required to make it operable, or is it restricted to the total of the costs of the renovations of the structure excluding the hot tub?
2) Would the costs to construct an exterior attachment, designed exclusively to house a hot tub as opposed to interior renovations, be considered "renovations or alterations costs to a dwelling" in paragraph 118.2(2)(l.2) of the Income Tax Act (the "Act")? The exterior attachment would be an enclosure that would be permanently attached to the home but would house the hot tub in the centre of it.
3) Does there exist a definitive medical definition of the term "severe and prolonged mobility impairment" within the Act? Can you provide the medical criteria that must be met in order to satisfy the meaning of "severe and prolonged"?
4) Does XXXXXXXXXX's letter dated 2001, previously provided to the Canada Customs and Revenue Agency ("CCRA"), meet the criteria required from a medical practitioner to satisfy the meaning of "severe and prolonged"? If this letter is insufficient, please outline what is required from a medical doctor.
1) The Tax Court of Canada, in the case of Beth Gibson v. Her Majesty the Queen, stated the following in its decision:
"The Respondent does not dispute the cost of the hot tub as being $8,761. That cost, however, is not a medical expense. I have accepted the Appellant's alternative argument and decided that the installation cost comes within paragraph 118.2(2)(l.2). There is no precise evidence concerning the installation cost but the Appellant stated that it exceeded the cost of the hot tub itself. I will allow the appeal and permit the installation cost as a medical expense under paragraph 118.2(2)(l.2) up to a maximum amount of $9,000 subject to the Appellant's production of acceptable receipts verifying such installation cost."
The Federal Court of Appeal confirmed this decision. Consistent with this decision it is our long-standing position that since a hot tub is not a prescribed medical device or equipment pursuant to Income Tax Regulation 5700, the cost of a hot tub is not considered a medical expense for the purposes of the medical expense credit in subsection 118.2(1) of the Act. It is our opinion that the "costs of the alterations" should not be extended to include the cost of the hot tub for the purpose of paragraph 118.2(2)(l.2) of the Act.
2) In the case of Beth Gibson v. Her Majesty the Queen, the installation costs of the whirlpool spa in the taxpayer's home were found to be reasonable expenses for the purpose of the phrase "relating to ..... alterations to a dwelling" in paragraph 118.2(2)(l.2) of the Act. The term "alterations" in paragraph 118.2(2)(l.2) of the Act is not defined in the Act and therefore the common ordinary meaning must be used. Merriam Webster's Collegiate Dictionary, Tenth Edition, defines alteration as: "the act or process of being altered" and defines altered as: "to make different without changing into something else". Since the exterior attachment could be seen as a significant change to the existing dwelling, it is our view that, generally, the ordinary meaning of the term "alterations" in paragraph 118.2(2)(l.2) of the Act should not be extended to include an exterior attachment that would be permanently attached to the home and designed exclusively to house a hot tub.
3) The term "prolonged", for the purposes of paragraph 118.2(2)(l.2) of the Act, is defined by paragraph 118.4(1)(a) which states, "An impairment is prolonged when it has lasted, or may reasonably be expected to last, for a continuous period of at least 12 months".
The term "severe", for the purposes of paragraph 118.2(2)(l.2) of the Act, is not defined in the Act. It is a question of fact whether a person has a severe impairment; however, it is our view that an individual who, because of a mobility impairment, qualifies for the mental or physical impairment credit under subsection 118.3(1) of the Act, would have a severe and prolonged mobility impairment for the purposes of paragraph 118.2(2)(l.2) of the Act.
Sections 118.3 and 118.4 of the Act serve to clarify which disabled individuals qualify for the credit for mental or physical impairment. Subsection 118.4(1) of the Act contains a set of rules that define certain terms for purposes of the medical expense credit (section 118.2 of the Act) and the credit for mental or physical impairment (section 118.3 of the Act). Subsection 118.3(1) of the Act states in part:
"Where
(a) an individual has a severe and prolonged mental or physical impairment,
(a.1) the effects of the impairment are such that the individual's ability to perform a basic activity of daily living is markedly restricted or would be markedly restricted but for therapy that
(i) is essential to sustain a vital function of the individual,
(ii) is required to be administered at least three times each week for a total duration averaging not less than 14 hours a week, and
(iii) cannot reasonably be expected to be of significant benefit to persons who are not so impaired".
Subsection 118.4(1) of the Act states in part:
"For the purposes of ...., sections 118.2 and 118.3 ...,
(a) An impairment is prolonged when it has lasted, or may reasonably be expected to last, for a continuous period of at least 12 months;
(b) An individual's ability to perform a basic activity of daily living is markedly restricted only when the individual is blind or is unable (or requires an inordinate amount of time) to perform such an activity, all or substantially all of the time, even with therapy and the use of appropriate devices and medication; and
(c) A basic activity of daily living in relation to an individual means:
(i) perceiving, thinking and remembering;
(ii) feeding or dressing oneself;
(iii) speaking so as to be understood, in a quiet setting, by another person familiar with the individual;
(iv) hearing so as to understand, in a quiet setting, another person familiar with the individual;
(v) eliminating (bowel or bladder functions); or
(vi) walking".
Generally, for the purposes of the Act, a severe mental or physical impairment is an impairment that causes you to be markedly restricted in any of the basic activities of living.
4) The limited information in the letter of September 13, 2001 from XXXXXXXXXX does not establish that you have a severe impairment. There is no requirement for a medical certificate to qualify for the medical expense credit under paragraph 118.2(2)(l.2) of the Act; however, if you make a claim for the medical expense credit under paragraph 118.2(2)(l.2) of the Act, you may be requested to submit a letter or information from your medical doctor indicating that you have a severe and prolonged mobility impairment in order to support your claim. This letter or information would be reviewed to determine if your impairment is severe and prolonged. In order to qualify for the mental or physical impairment credit under subsection 118.3(1) of the Act, discussed above, a medical doctor must complete T2201, Disability Tax Credit Certificate.
It must be decided on a case-by-case basis whether a particular impairment is severe and prolonged. If you remain uncertain as to whether your impairment is severe and prolonged, we would encourage you to contact, or submit your questions or information, to your local Tax Services Office, which can consider your situation, since they have the responsibility to make such determinations.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the CCRA. Our practice is to make this disclaimer in all instances in which we provide an opinion.
We trust the above comments are of assistance.
Yours truly,
Steve Tevlin
for Director
Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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