11 March 2002 External T.I. 2001-0115215 - 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 CCRA.

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

Principal Issues: Paragraph 118.2(2)(l.7) of the Income Tax Act (the "Act") provides that a portion of the amount paid for the acquisition of a van that has been adapted (at the time of its acquisition or within 6 months after that time) for the transportation of a patient that requires the use of a wheelchair qualifies as a medical expense. The amount that could qualify as a medical expense is the lesser of $5,000 and 20% of the amount paid for the acquisition of the van after deducting any amount included therein, which qualifies as a medical expense pursuant to paragraph 118.2(2)(m) of the Act (Paragraph 118.2(2)( m) effectively refers to section 5700 of the Regulations-of which paragraphs 5700(m) and (n) refer to certain devices or equipment that may be added to a vehicle). We have been asked whether (i) 20% of the cost of the van and (ii) the actual cost of the device or equipment are eligible for the medical expense tax credit.

Position: The amounts referred in (i) and (ii) are both eligible medical expenses.

Reasons: Paragraph 118.2(2)(m) of the Act has been carved out of paragraph 118.2(2)(l.7) of the Act.

XXXXXXXXXX 2001-011521
M. Eisner, CA
March 11, 2002

Dear XXXXXXXXXX:

Re: Medical Expenses

This is in reply to your letter of December 10, 2001 concerning the above-noted subject.

You have indicated that you are aware that for 1997 and subsequent years, 20% of the cost of a van (up to the maximum of $5,000) is eligible for the medical expense tax credit (the "Credit") if the van is modified for the transportation of an individual who requires the use of a wheelchair. You have asked whether 20% of the cost of the van and the actual cost of the modifications to the van are both eligible for the Credit.

Our Comments

For your convenience, we have enclosed a copy of Interpretation Bulletin IT-519R2 (Consolidated) "Medical Expense and Disability Expense Tax Credits and Attendant Expense Deduction" which, amongst other things, discusses the Credit.

The provision in respect of which your concern relates is paragraph 118.2(2)(l.7) of the Income Tax Act (the "Act"). This paragraph provides that a portion of the amount paid for the acquisition of a van, that has been adapted (at the time of its acquisition or within 6 months after that time) for the transportation of a patient that requires the use of a wheelchair, qualifies as a medical expense. The amount that could qualify as a medical expense is the lesser of $5,000 and 20% of the amount paid for the acquisition of the van after deducting any amount included therein, which qualifies as a medical expense pursuant to paragraph 118.2(2)(m) of the Act.

Paragraph 118.2(2)(m) of the Act provides the authority for including various types of devices and equipment as medical expenses for purposes of the Credit. To qualify under paragraph 118.2(2)(m) of the Act (and subject to certain prescribed limits), the device or equipment must satisfy the following conditions: (i) be of a prescribed kind; (ii) be prescribed by a medical practitioner; (iii) not be described in any other paragraph of subsection 118.2(2) of the Act; and (iv) meets such conditions as may be prescribed as to its use or the reason for its acquisition. For the purposes of paragraph 118.2(2)(m) of the Act, section 5700 of the Income Tax Regulations (the "Regulations") lists the devices and equipment that are of a prescribed kind. Paragraph 5700(m) of the Regulations refers to, among other things, power-operated lift equipment designed exclusively for use by or for a disabled individual to assist the individual to gain access to a vehicle or to place the individual's wheelchair in or on a vehicle. Paragraph 5700(n) of the Regulations refers to a device designed exclusively to enable an individual with a mobility impairment to operate a vehicle. Accordingly, power-operated lift equipment and driving devices, such as a steering knob and a right-turn signal adapter, may qualify as medical expenses provided that they are prescribed by a medical practitioner and meet the other conditions noted above.

Therefore, in general terms, the effect of paragraph 118.2(2)(l.7) of the Act is to allow the Credit in respect of the amount paid for the acquisition of the van, excluding any amount for a device or equipment described under paragraph 118.2(2)(m) of the Act. However, amounts paid in respect of such devices or equipment qualify for the Credit by virtue of paragraph 118.2(2)(m) of the Act.

We trust that our comments are of assistance to you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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