6 August 2002 External T.I. 2002-0148245 - SPERM BANKING - WHETHER MEDICAL EXPENSE

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: Whether amounts paid to have an individual's sperm banked (which involved extracting, testing and freezing the sperm), qualifies as a medical expense under subsection 118.2(2) of the Income Tax Act.

Position: Question of fact but may qualify under paragraph 118.2(2)(a).

Reasons: Under paragraph 118.2(2)(a) of the Act, an amount may qualify as a medical expense if it is paid "to a ... public or private licensed hospital in respect of medical ... services..." In the case at hand, the amounts were paid to a public hospital. Further, it is our view that the amounts can be considered to have been paid in respect of medical services given the particular circumstances.

XXXXXXXXXX 	                                                                         	2002-014824
J. Gibbons, CGA
August 8, 2002

Dear XXXXXXXXXX:

We are replying to your enquiry, sent by facsimile on June 20, regarding the interpretation of paragraph 118.2(2)(o) of the Income Tax Act. You wish to know whether amounts paid to have an individual's sperm banked (which involved extracting, testing and freezing the sperm), qualifies under this provision.

The individual was born with spina bifida occulta, a highly debilitating disease. Prior to his last operation, the individual was advised that one of the potential outcomes of the surgery was that he might lose the ability produce sperm. As a result, the individual decided to have his sperm banked so that one day he might father children.

Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular IC 70-6R5.

In our view, the wording of paragraph 118.2(2)(o) of the Act encompasses only amounts paid for procedures or services that are necessary for maintaining health, preventing disease and which help a medical practitioner in diagnosing the patient's medical condition and formulating a course of treatment. For this paragraph to apply, the procedures or services must be of a diagnostic nature and in respect of procedures or services prescribed by a medical practitioner or dentist. Accordingly, it is our view that amounts paid for banking sperm would not qualify under this provision. On the other hand, we feel that the particular expenses may qualify as medical expenses under paragraph 118.2(2)(a) of the Act.

Under paragraph 118.2(2)(a) of the Act, an amount may qualify as a medical expense if it is paid "to a ... public or private licensed hospital in respect of medical ... services..." In this regard, you indicated that the amounts were paid to the XXXXXXXXXX, Fertility Clinic. Further, it is our view that the amounts can be considered to have been paid in respect of medical services given the particular circumstances.

We trust that these comments will be of assistance.

Yours truly,

Lena Holloway, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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