26 January 2005 External T.I. 2004-0097651E5 - Medical Services as Self-assessed

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.

Principal Issues: What are the income tax implications of providing office space, office supplies and secretarial services free of charge to a physician providing medical services in the taxpayer's orthopaedic clinic?

Position: Tax neutral position for income tax purposes. There is no requirement for the Clinic to report an amount in respect of the office space, office supplies and secretarial services provided free of charge to the physician.

Reasons: The Clinic and the physician are dealing at arm's length.

XXXXXXXXXX 								2004-009765
									Luisa A. Majerus, CA
January 26, 2005							(613) 957-2138

Dear XXXXXXXXXX:

Re: Medical Services as Self-assessed

We are writing in response to your letter of September 23, 2004, wherein you inquired about the income tax implications to physicians who are provided office space, office supplies and secretarial services free of charge to operate their medical practice in the orthopaedic clinic operated by XXXXXXXXXX (the "Clinic").

Specifically, you are concerned that since the Clinic has made these goods and services available free of charge to the physicians, the value of these services should be included in their income. The physicians earned income directly from OHIP for providing the medical services in the Clinic but did not receive any other compensation from the Clinic. The physicians in turn have referred patients to the Clinic in order to purchase orthopaedic supports or custom made shoes.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.

In the situation outlined, it is our view that the value of the office space, office supplies and secretarial services provided free of charge to the physician by the Clinic is not required to be included in the physician's income. As well, the physician may not claim an expense with respect to the value of space and services so provided.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate