25 May 2011 External T.I. 2011-0399851E5 - Neocate Medical formula

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: Whether the amounts paid by the taxpayer for Neocate infant formula qualify as a medical expense for the purposes of calculating the medical expense tax credit.

Position: No, if it is lawfully available without a prescription then it would not generally qualify as a medical expense.

Reasons: Not allowable under 118.2(2)(n) of the Income Tax Act.

XXXXXXXXXX
				2011-039985
				Linda Compton

May 25, 2011

Dear XXXXXXXXXX :

Re: Medical expenses

This is in response to your correspondence of March 21, 2011, wherein you request information regarding whether the amounts paid for Neocate infant formula qualify as a medical expense for the purposes of the medical expense tax credit ("METC").

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in 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. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which 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 comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Medical expenses which are eligible for the METC are limited to those described in subsection 118.2(2) of the Act. If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.

Subparagraph 118.2(2)(n)(i) of the Act allows the costs paid for drugs, medicaments or other preparations or substances (hereinafter referred to as "drugs"):

(A) that are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function;

(B) that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist; and

(C) the purchase of which is recorded by a pharmacist.

Based on the foregoing, only drugs that can lawfully be purchased only with a prescription qualify under this provision.

Drugs that may lawfully be acquired without a prescription may qualify for the METC under subparagraph 118.2(2)(n)(ii) of the Act as prescribed under section 5701 of the Income Tax Regulations ("Regulations") which allows the cost of a drug if the drug:

(a) is manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function;

(b) is prescribed for a patient by a medical practitioner; and

(c) may, in the jurisdiction in which it is acquired, be lawfully acquired for use by the patient only with the intervention of a medical practitioner.

Thus, a drug that may only be acquired through the intervention of a medical practitioner (a pharmacist, for example) may qualify under section 5701 of the Regulations even if it does not lawfully require a prescription. However, pursuant to this provision, the patient must still obtain a prescription for the particular use of the drug.

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). Therefore, it would be necessary to examine both federal and provincial/territorial legislation and regulations in order to make the determination for a particular drug.

If this baby formula is available for self-selection as an over-the-counter product, it would not generally meet the requirements of any of the above noted provisions, and would not qualify as a medical expense for the METC.

We trust our comments will be of assistance to you.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch