1 November 1994 External T.I. 941575A - MEDICAL 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

An individual and his wife purchased a handicapped accessible home. As a consequence of purchasing the home, can they be regarded as having paid an amount "for reasonable expenses relating to renovations or alterations to a dwelling of the patient"?

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

The cost of features in making the home accessible to a handicapped individual were incurred during its original construction.

		941575
XXXXXXXXXX		M. Eisner

November 1, 1994

Dear XXXXXXXXXX:

Re: Medical Expenses

Thank you for your letter of June 9, 1994 with enclosures concerning the medical expense tax credit. We regret the delay in providing you with a response.

You have indicated that as a consequence of your condition (you have a prolonged and severe mobility impairment), you obtained an estimate from a contractor during 1993 as to the cost of making certain modifications to your home. The contractor estimated that it would cost at least $50,000 to renovate your residence in order to make it functional in relation to your disability. However, the renovations would still not have made the residence totally accessible (e.g., the halls would remain narrow and there would be no attached garage to facilitate the entry or exit from a car during inclement weather).

An alternative course of action was also available. In this regard, you and your wife became aware of a handicapped accessible home in your area that was being offered for sale. As the estimated net cost of selling the current residence and purchasing the handicapped accessible residence was approximately $50,000, the decision was made to purchase the handicapped accessible residence rather than proceeding with the renovations.

You are aware that the above circumstances involve paragraph 118.2(2)(l.2) of the Income Tax Act (the Act) which states that a medical expense of an individual is an amount paid

"for reasonable expenses relating to renovations or alterations to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment, to enable the patient to gain access to, or to be mobile or functional within, the dwelling;"

We also note that the "individual" in the above provision may be yourself or your wife.

As a consequence of two points, you have requested that we consider the extent that the cost in respect of the handicapped accessible residence qualifies for the medical expense credit. The first is that during the construction of this residence, a number of features were included so that it would accommodate an individual who had a severe and prolonged mobility impairment. The second is the net cost of acquiring the residence was $50,000.

In considering the points that you have raised, the key requirement in paragraph 118.2(2)(l.2) is that you or your wife must have paid for the expenses of renovating or altering the new residence. In relation to this comment, we note that when an individual purchases a residence, he or she cannot be regarded as having paid expenses (e.g., lumber, electrical, plumbing etc.) for its construction. Similarly, an individual who purchases a residence cannot be regarded as having paid the expenses in respect of features of a residence that were included in the course of its construction (i.e., such expenses would have been paid by the home builder). Consequently, you and your wife in purchasing the residence in respect of which mobility impairment features were added during its original construction cannot be regarded as having paid the expense of renovating or modifying a home to include these features. Similarly, you and your wife cannot be regarded as having paid expenses in respect of the features on the basis that you and your husband incurred a net cost of $50,000 in acquiring the handicapped accessible residence.

In short, the expenses with respect to the disability specific features were paid by the home builder and you and your wife simply acquired the residence. Consequently, it would follow that neither you nor your wife would be eligible to claim an amount under paragraph 118.2(2)(l.2) of the Act with respect to "an amount paid for reasonable expenses relating to renovations or alterations to a dwelling of the patient".

As a final comment, we would mention that in order for a part of the purchase price of a handicapped accessible home to become an eligible medical cost, an amendment to the Income Tax Act would be required. Should you wish to pursue this matter, you should make a submission to the Department of Finance. The address of that Department is set out below:

Department of Finance
140 O'Connor St.
Ottawa, Ontario
K1A 0G5

While we regret that we could not give you a favourable reply, we trust that our comments will clarify the Department's position.

Yours truly,

J.A. Szeszycki
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch