10 November 1999 Internal T.I. 9924737 - 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: (A) Whether the patient (the patient is four years old and resides solely with his mother and father) is dependent upon his grandfather for support in relation to subsection 118(6) and section 118.2 of the Act. The patient is autistic and it is expected that the impairment will continue in the foreseeable future.

(B) Whether travel expenses reimbursed by the grandfather to a consultant who provided medical services, are eligible medical expenses with respect to the medical expense tax credit.

(C) We have also been requested to provide our comments concerning the deductibility of amounts which relate to therapy provided to the patient.

Position: (A) The determination of this issue involves a question of fact. However, the facts indicate that the patient is dependent upon the grandfather for support.

(B) In relation to the medical expense tax credit, the travel expenses would be treated in the same manner as the medical services that were provided.

(C) It is our view that the consideration would be paragraph 118.2(2)(a) of the Act (the fees would have to be paid to a "medical practitioner" which is defined in subsection 118.4(2) of the Act).

Reasons: (A) The patient's parents do not have the means to pay the medical expenses and the grandfather will pay the expenses on an ongoing basis. It is also noted that an individual can be dependent upon more than person for support.

(B) The sole consideration received from the consultant for the payments was the medical services.

(C) See reasons - (specific information was not provided)

November 10, 1999

	Shawinigan Tax Centre  	HEADQUARTERS
	DTC Unit 565 2-9	M. Eisner
	Michael Benedict	(613) 957-2138

992473

Medical Expenses

This is in reply to your memorandum of September 10, 1999, concerning the medical expense tax credit. We also acknowledge our telephone conversations (Eisner/Benedict) on October 14 and November 4, 1999, in which we obtained some clarification of the circumstances.

In your situation, the four year-old grandson (the "Patient") of an individual ("Individual A") was diagnosed with autism (a severe and prolonged mental condition) in XXXXXXXXXX. The Patient resides with his mother and his father (the "Parents") in XXXXXXXXXX. The Patient's condition meets all the conditions with respect to the disability tax credit which was claimed in XXXXXXXXXX and XXXXXXXXXX by one of his Parents.

With respect to the child's disability, the Parents decided to proceed with a method of treatment called - "Applied Behavioural Analysis and Discrete Trial Teaching" because of its documented success in literature. This type of therapy/treatment is not available within the XXXXXXXXXX area. As a result, the Parents hired a consultant (the "Consultant') from the United States (XXXXXXXXXX). The Consultant's services included the establishment and oversight of the Patient's program, as well as providing overall program goals and direction. For XXXXXXXXXX, the Consultant's costs of $XXXXXXXXXX included travel expenses for meals, hotels, and airfare (the "Travel Expenses") along with the time for her services. In addition, further medical costs of $XXXXXXXXXX with respect to behavioural therapy were paid. The total of all the expenses paid in XXXXXXXXXX was $XXXXXXXXXX.

The costs of the Patient's program are not covered by an insurance or a government program. The Parents are a single income family with an income of slightly over $XXXXXXXXXX a year. Individual A paid the expenses and claimed them in calculating the medical expense tax credit under section 118.2 of the Income Tax Act (the "Act"). It is estimated that the annual costs of the Patient's program in the foreseeable future will be about $XXXXXXXXXX. It is your understanding that Individual A will continue to pay the costs.

One of your concerns is whether the Patient was dependent upon Individual A for support with respect to the condition set out in paragraph 14(b) of Interpretation Bulletin IT-519R2 "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction", which, among other provisions, relates to section 118.2 and subsection 118(6) of the Act. The second concern is whether the portion of the payment made to the consultant in respect of her Travel Expenses qualifies for the medical expense tax credit.

Our Comments

From the information provided, it is our view that the Patient is dependent on Individual A for support and, therefore, would meet the definition of dependant pursuant to subsection 118(6) of the Act for the purposes of the medical expense tax credit claim by Individual A under subsection 118.2(2) in respect of the Patient.

In making your determination as to whether the Consultant's costs are eligible medical expenses, it is our view that you would have to rely on paragraph 118.2(2)(a) of the Act. In other words, the fees would have had to be paid to a medical practitioner in respect of medical services provided. The term "medical practitioner" is defined in subsection 118.4(2) of the Act. We note that such a person must be authorized to practice as such, and where the reference (in subsection 118.2(2)) is used in respect of a service rendered to an individual, pursuant to the laws of the jurisdiction in which the service is rendered. Based on the information provided, it is our view that the amount paid to the Consultant is not a medical expense pursuant to subsection 118.2(2) of the Act.

In addition to the foregoing, we would like to draw your attention to draft paragraph 118.2(2)(l.9) of the Act that is applicable to the 1999 and subsequent taxation years. That provision will allow, as eligible medical expenses, remuneration paid for therapy administered to an individual with a severe mental or physical impairment who is eligible for the disability tax credit. The therapy must be prescribed by, and administered under the general supervision of, a medical doctor, or a psychologist in the case of a mental impairment.

If you receive a further submission or require any further explanations, we would be pleased to be of further assistance. In this regard, you can contact Marv. Eisner at the telephone number set out above.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the legislation Access Database (LAD) on the Department's mainframe computer. 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 your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.

John Oulton
Section Chief
Business, Property & Employment Section III
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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