13 December 2006 External T.I. 2006-0189561E5 - Deduction by an estate for attendant care expenses

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: (1) In a situation in which an estate pays a claim for homecare expenses previously rendered to the deceased individual, and/or home renovations related to such homecare, to what extent can the estate use such expenses as a deduction from income or as a credit against tax payable by the estate?

(2) To what extent can the Disability Supports Deduction be used if the homecare allowed the deceased to earn investment income?

Position: (1) The expenses cannot be deducted by the estate from its income nor used as a credit against its tax payable. Provided the expense otherwise qualifies as an expense eligible for the medical expense tax credit for the deceased individual, and was paid by the estate within 24 months of the individual's death, the deceased's terminal return can be revised to include such amounts in the claim for the medical expense tax credit.

(2) The disability supports deduction is not available to the estate as it is only available where the amount paid benefits the taxpayer taking the deduction. Further, the deduction was not available to the deceased if the homecare only enabled him or her to earn investment income.

Reasons: (1) The medical expense tax credit is available only to an individual, not to a trust.

(2) The Disability Supports Deduction in section 64 is available only to the particular taxpayer who benefits from the outlay. The outlay did not enable the Estate to earn one of the specified types of income and therefore cannot be used by the Estate as a deduction. Furthermore, it does not appear that the decedent was eligible for the deduction, given that the expense was not incurred for homecare that allowed the individual to earn the types of income specified in the legislation.

								2006-018956
XXXXXXXXXX 							Renée Shields
(613) 948-5273
December 13, 2006

Dear XXXXXXXXXX:

Re: Attendant Care Expenses

This is in response to your electronic correspondence of June 5, 2006 inquiring about the deductibility of homecare expenses paid by an estate in respect of a deceased individual.

The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a transaction that has already been completed, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

You have indicated that the estate of the deceased individual paid for unspecified homecare/attendant services provided to the decedent, which services allowed the decedent to earn investment income. You would like to know if the amount paid for the homecare services can be used either as a deduction from the estate's income as a disability supports deduction under section 64 of the Income Tax Act (the "Act") or as a non-refundable tax credit for qualifying medical expenses. Disability Supports Deduction

Generally speaking, and subject to certain limitations, the disability supports deduction permits a taxpayer to deduct from income for a year the amount of specified disability supports expenses paid in the year to enable the taxpayer to earn income from an office or employment, from business or from conducting research in connection with a grant received for that purpose. It is also available if the outlay permits the taxpayer to attend secondary school or to attend a designated educational institution.

Although a payment for attendant care is one of the types of expenses that qualifies for the disability supports deduction, it is available only to the taxpayer who benefits from the payment. Where the taxpayer in question is an estate, the deduction is not available since an outlay for attendant care would not have enabled the estate to earn income or to attend school. Furthermore, in the situation you described, given that the attendant care did not enable the decedent to earn income from office, employment or business or to carry out research or to attend school, it would appear that he or she would not have qualified for the deduction.

Medical Expense Tax Credit

The medical expense tax credit in section 118.2 of the Act is a non-refundable tax credit that reduces the amount of tax payable. There are various provisions under which the cost of attendant care may qualify as an expense eligible for the medical expense tax credit. However, for a taxpayer to claim the credit, the medical expense(s) must have been incurred in respect of that taxpayer, or for the benefit of the taxpayer's spouse or common-law partner or for certain dependants of the taxpayer. Accordingly the medical expense tax credit is not available to reduce tax owing by a taxpayer that is an estate. For information regarding the completion of a tax return for a trust, you may wish to refer to Guide T40103, "T3 Trust Guide."

We note, however, that if the attendant care expense was one for which the deceased individual could have claimed a medical expense tax credit and was paid by the estate within 24 months of the individual's date of death, the decedent's terminal return can be revised to include such expense in calculating the credit. You may wish to refer to T4011, "Preparing Returns for Deceased Persons" in this regard.

The Act contains various conditions that must be met in order for an attendant care expense to qualify for the medical expense tax credit for purposes of an individual's tax return. This means it is a question of fact whether any particular outlay qualifies for the credit. Your email also makes reference to "homecare renovation expenses." While certain types of renovations to the home of a mobility-impaired individual are eligible for the medical expense tax credit, this determination is also a question of fact. Your email provides no information regarding the nature of the attendant care services or of the renovations. For more information on the types of expenses that qualify and the applicable conditions, please refer to any of the following publications:

• RC4064, "Medical and Disability-Related Information"
• IT-519R2, "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction"
• 5000G, "General Income Tax and Benefit Guide"

We trust this information will be of assistance.

Yours truly,

Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch