30 September 2014 External T.I. 2014-0533671E5 - METC-Part of a hip replacement

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: Does the cost of a ceramic femoral head as part of a hip replacement, qualify as a medical expense for the METC?

Position: Likely in this situation.

Reasons: Legislation and intent

XXXXXXXXXX
2014-053367
George A. Robertson, CPA, CMA

September 30, 2014

Dear XXXXXXXXXX:

Re: Medical Expense Tax Credit

This is in response to your correspondence of April 22, 2014, which was transferred to us from the tax services office, asking whether the cost you incurred for a ceramic femoral head (the prosthesis) as part of total hip replacement surgery is an eligible expense for purposes of the medical expense tax credit. You explained that the prosthesis was recommended to you by your surgeon and that you paid your local public hospital for the incremental cost of the device over a standard hip prosthesis. You asked if the cost of the prosthesis would be an eligible expense according to paragraph 118.2(2)(n) of the Income Tax Act and section 5701 of the Income Tax Regulations as a preparation used to correct an organic function.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Paragraph 118.2(2)(n) of the Act allows as a medical expense, amounts paid for drugs, medicaments or other preparations or substances when various requirements are met. In our view, the amount paid for the prosthesis would not be an eligible medical expense under paragraph 118.2(2)(n).

Paragraph 118.2(2)(a) of the Act allows, as a medical expense, an amount paid to a medical practitioner, dentist or nurse or a public or licensed private hospital in respect of medical or dental services. Generally, medical services are diagnostic, therapeutic or rehabilitative services that are performed by a medical practitioner acting within the scope of his or her professional training to treat an existing illness or condition. You have indicated that the incremental cost of the prosthesis was paid to your local hospital in respect of the hip replacement surgery. Therefore, in our view, the amount paid to the hospital for the prosthesis as part of total hip replacement surgery would likely qualify as an eligible medical expense under paragraph 118.2(2)(a) of the Act.

For more information on the medical expense tax credit, please see the Income Tax Folio S1-F1-C1, Medical Expense Tax Credit available at www.cra-arc.gc.ca.

We trust that these comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate