Income Tax Severed Letters - 2011-03-18

Principal Issues: Whether the costs of Natural Health Products are eligible for the medical expense tax credit (METC) and may be covered by a PHSP.

Position: Generally, no unless qualify under 118.2(2)(k) which allows the cost of insulin, oxygen, liver extract injectible for pernicious anaemia or vitamin B12 for pernicious anaemia as prescribed by a medical practitioner. Only drugs that can lawfully be purchased only by prescription (or only with the intervention of a medical practitioner) will qualify under 118.2(2)(n). However, it is a question of fact whether a particular drug may lawfully be acquired only by prescription (or only with the intervention of a medical practitioner). Need to look at both federal and provincial/territorial legislation and regulations in order to make that determination. If the cost of the drug would not normally have otherwise qualified for METC, then does not qualify as a medical expense covered by a PHSP.

Reasons: Wording of 118.2(2)(n) and paragraph 4 of IT-339R2

Principal Issues: (1) Which province has the ability to tax a capital gain realized by a taxpayer?
(2) In which year must the capital gain be included in the computation of the taxpayer's income?

Position: (1) The province of residence, which is generally the one in which the taxpayer is resident as of December 31 of a particular year.
(2) Generally, the year in which the taxpayer is entitled to the proceeds of disposition of the property.

Reasons: Income Tax Act.

Principal Issues: 1) Are specific disability related expenses such as education fees, gym memberships, home repairs, etc. allowed for purposes of the medical expense tax credit? 2) Can a person income split their salary with his spouse to compensate her for talk therapy treatment she provides at home to their disabled son?

Position: 1) No; 2) No

Reasons: Only expenses which are listed in subsection 118.2(2) of the Act qualify as medical expenses. Therapy expenses only qualify if the therapy is received by a person who qualifies for the disability tax credit under section 118.3 of the Act, and the therapy is provided by someone who is not the spouse or common-law partner of the person who is claiming the expense and who is 18 years of age or older, when the amounts are paid. The therapy has to be prescribed and supervised by a medical doctor, a psychologist (for a mental impairment), or an occupational therapist (for a physical impairment).

Principal Issues: Whether a sleep evaluation study paid to a private sleep clinic qualifies as medical expenses for purposes of the METC

Position: Yes

Reasons: A sleep evaluation study meets the conditions of paragraph 118.2(2)(o) which includes diagnostic procedures for maintaining health.

Principal Issues: Whether the cost of: (1) An in-vitro fertilization process performed outside Canada qualify as medical expenses, and whether (2) The related travel costs for an in-vitro fertilization performed outside Canada qualify as medical expenses.

Position: (1) Yes (2) Yes if the conditions of paragraph 118.2(2)(g)(v) are met.

Reasons: (1) Amounts paid to a medical practitioner or a licensed hospital qualify as a medical expense under paragraph 118.2(2)(a) of the Act. (2) Transportation expense to travel not less than 40 km to obtain medical services qualify under paragraph 118.2(2)(g) of the Act and other travel expenses qualify under paragraph 118.2(2)(h) of the Act if the individual travels not less than 80 km to obtain medical services and it is reasonable for the individual to have done so, the route taken was reasonably direct and substantially equivalent medical services were not available in the individual's locality.

Principal Issues: Clarification requested in respect of the interaction of paragraphs 88(1)(d.2) and (d.3) in the context of a post-mortem bump planning strategy.

Position: Clarification provided.

Reasons: In accordance with the Act and our previous positions.

Principal Issues: Clarification of the meaning of "uninterrupted period" in the definition of an eligible electronic payment card for the purposes of the pubic transit tax credit.

Position: "Uninterrupted period" means that the minimum 32 one-way trips must be taken during a period that comprises 31 consecutive days, but does not mean that a trip or trips must be made on each day during that period.

Principal Issues: Whether interest is exigible when losses are carried back.

Position: Yes.

Reasons: S. 161(7)(b) provides that interest continues to accrue until 30 days after the request to carry back losses is made.

Principal Issues: Whether the waiver of monthly condo fees in exchange for performing bookkeeping duties results in income to be reported on a T4 slip.

Position: It is a question of fact, but most likely yes.

Reasons: If the benefit to be provided in exchange for the services was known at the time the treasurer accepted the office, the amount of the condo fees waived would be income from an office.

Principales Questions: La société détenue par le contribuable peut-elle réclamer la déduction accordée aux petites entreprises?

Position Adoptée: Question de fait. Nous avons fourni des commentaires généraux au contribuable.

Raisons: Loi de l'impôt sur le revenu

Principales Questions: Un contribuable qui a une activité quotidienne de jouer à des jeux de hasard sur Internet, par le biais de casinos virtuels, exploite-t-il une entreprise au sens de la Loi de l'impôt sur le revenu?

Position Adoptée: Question de fait. Généralement de telles activités ne constitueront pas une source de revenus.

Raisons: Loi de l'impôt sur le revenu.

Principal Issues: Whether telework meets the requirements on T2200 form - Declaration of Conditions of Employment of requiring an employee to work from home under a contract of employment.

Position: Question of fact, but in this situation probably yes

Principal Issues: Whether: 1. A Cryo-Cuff cold therapy device prescribed by a doctor to control and reduce knee swelling qualifies as a medical expense and, 2. whether medical devices in general need to be new devices in order to qualify as medical expenses.

Position: 1. No and 2.No

Reasons: 1.Cold therapy devices are not provided for under subsection 118.2(2) or section 5700 of the Regulations. 2. There is no requirement that medical devices otherwise meeting the conditions of subsection 118.2(2) or section 5700 of the Regulations need to be new devices.

Principal Issues: Would wind turbines qualify for Investment Tax Credits

Position: No

Reasons: Such property would not be prescribed machinery and equipment per regulation 4600(2) for the purposes of the definition "qualified property" in subsection 127(9).

Principal Issues: Whether a particular iontophoresis device that has been prescribed by a doctor for the treatment of hyperhidrosis is a qualifying device for the purposes of the medical expense tax credit.

Position: Yes.

Reasons: The particular iontophoresis device is considered a qualifying electrotherapy device under paragraph 5700(z.2) of the Regulations.

Principal Issues: 1. Can a bankrupt individual claim the HRTC on certain expenditures incurred in renovating a house which he owned jointly with his mother for a part of the HRTC eligible period?
2. Can an individual claim the HRTC for the home renovation work he did and the expenses he incurred?

Position: 1. Yes, if all of the requirements for the HRTC are met by the bankrupt individual.
2. Yes for the cost of building materials, fixtures, equipment rentals, and building plans and permits, but no for the value of homeowner's labour.

Reasons: 1. Generally, paragraph 128(2)(f) of the ITA permits the bankrupt individual to claim the personal tax credits available in sections 118 to 118.9 of the ITA.
2. Section 118.04

Principal Issues: Whether an individual and his spouse who are cohabitants in one room in a nursing home are considered involuntarily separated and both eligible for the Ontario Senior Homeowners Property Tax Credit (the Credit).

Position: It is a question of fact whether individuals are separated or residing with their spouse. Where an individual and his/her spouse share one room in a nursing home, the individual has a qualifying spouse. The spouses are not considered living separate and apart and only one can claim the credit.

Reasons: Legislation.

Principal Issues: Client is requesting clarification on when capital gains is applicable on the sale of one of two principal residences resulting from a marriage.

Position: A question of fact

Reasons: Legislation and previous position

Principal Issues: Comments on currency transactions, margin accounts and superficial loss rules

Position: Comments provided

Reasons: IT-95R, par 13