3 March 2006 Internal T.I. 2005-0164501I7 - Medical Expenses; Cost of Servicing Modified Van

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: Are maintenance and repair costs relating to a modified van qualifying medical expenses?

Position: No, except to the extent that the servicing relates specifically to a device or equipment listed in 118.2(2) or Regulation 5700. In the particular case, it appears that the cost of servicing the hand controls will be a qualifying medical expense as the hand controls are described in Regulation 5700(n).

Reasons: This is a long-standing position. In general, if the cost of a device itself qualifies for the medical expense tax credit then the cost of maintaining and repairing the device should also qualify. General servicing costs are personal expenses that are not provided for in the Act or Regulations and are not deductible.

							March 3, 2006

	Joseph Mundy				HEADQUARTERS
	Appeals Division				Eliza Erskine
	Summerside Tax Centre			(613) 954-3199

							2005-016450

Medical Expense Tax Credit - Cost of Servicing a Modified Van

We are writing in response to your email to us of December 15, 2005, wherein you asked for our comments on whether certain expenses related to servicing a van that had been modified to allow a disabled taxpayer to drive would qualify for the medical expense tax credit under subsection 118.2(2) of the Income Tax Act (the Act). We also acknowledge our telephone conversation of January 26, 2006 (Mundy/Erskine).

Facts

Our understanding of the facts is as follows:

• The taxpayer owns a van that has been modified to accommodate the taxpayer's need for a wheelchair.
• The taxpayer has installed mechanical and electronic equipment in his van which enables him to drive the van using hand controls. He is unable to drive the van using the usual arrangement of a steering wheel, gear shift and pedals.
• The taxpayer has claimed the cost of servicing the hand controls and the cost of repairing certain air conditioning hoses as qualifying medical expenses for purposes of the medical expense tax credit.

Our Comments

It is our view that the cost of maintaining and repairing a device or equipment listed in subsection 118.2(2) of the Act or section 5700 of the Income Tax Regulations (the Regulations) is a qualifying medical expense for purposes of the medical expense tax credit. On the basis that the hand controls referred to above are described in paragraph 5700(n) of the Regulations, reasonable servicing costs relating to the hand controls, including the cost of replacement parts, will qualify for the medical expense tax credit.

The cost of general vehicle maintenance does not qualify for the medical expense tax credit as it is a personal expense that is not specifically provided for in subsection 118.2(2) of the Act. Therefore, while part of the cost of acquiring a van that is or will be modified for the transportation of a taxpayer who requires the use of a wheelchair is a qualifying medical expense under paragraph 118.2(2)(l.7), normal servicing costs relating to such a van will not qualify for the medical expense tax credit. Servicing costs that relate directly to the modifications to the van may qualify for the medical expense tax credit where the device or equipment being maintained or repaired is itself described in Regulation 5700. For example, servicing costs relating to equipment designed exclusively to assist the taxpayer to gain access to the van or to place his wheelchair in the van will generally qualify for the medical expense tax credit as such equipment is described in paragraph 5700(m) of the Regulations. In our view, it is unlikely that the cost of repairing an air conditioning hose would qualify for the medical expense tax credit.

We hope the above will be of assistance to you in completing your review of the taxpayer's appeal.

For your information a copy this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613) 994-2898. A copy will be sent to you for delivery to the taxpayer.

If you have additional questions on this matter, please feel free to contact us.

Robin Maley
for Director
Business and Partnerships Division
Income Tax Rulings Directorate