31 July 1998 External T.I. 9818715 - LONG TERM CARE

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: Whether proposed Long Term Care Insurance Plan qualifies as a Private Health Services Plan for purposes of paragraph 118.2(2)(q) of the Act.

Position: Determination can only be made when all facts & information is available (including a copy of the Insurance Policy).

Reasons: Question of Fact.

XXXXXXXXXX 981871

Wm. P. Guglich

Attention: XXXXXXXXXX

July 31, 1998

Dear Sir:

Re: Premiums for Long Term Care Insurance as a Medical Expense

This is in reply to your letters of July 20 and 23 1998, concerning the deduction of long term care insurance premiums as a medical expense under paragraph 118.2(2)(q) of the Income Tax Act (the “Act”). You also submitted various other documentation.

* XXXXXXXXXX

You requested confirmation that the premiums on the proposed LTCI plan as described above will qualify as a medical expense under paragraph 118.2(2)(q) of the Act.

In your letter you have outlined what appears to be an actual fact situation related to an actual proposed transaction and, therefore, we bring to your attention Information Circular 70-6R3, dated December 30, 1996, issued by Revenue Canada (see attached). Confirmation with respect to proposed transactions involving specific taxpayers (i.e., the XXXXXXXXXX and its members) will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. In considering such a request we would require a complete description of all the relevant facts, information and proposed transactions, including a copy of the insurance policy to be entered into between the parties. Nevertheless, we can offer the following general comments.

Our Comments

To qualify as a medical expense under paragraph 118.2(2)(q) of the Act, an amount must be paid as a premium, contribution or other consideration to a private health services plan in respect of one or more of the individual, the individual’s spouse and any member of the individual’s household with whom the individual is connected by blood relationship, marriage or adoption. The term private health services plan (“PHSP”) is defined in subsection 248(1) of the Act, and the Department’s general position on PHSPs is set out in Interpretation Bulletin IT-339R2 Meaning of “Private Health Services Plan”. As indicated in paragraph 3 of IT-339R2, one of the requirements of a PHSP is that it must be in the nature of insurance. Further, as indicated in paragraph 4 of IT-339R2, the PHSP coverage must be for hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under subsection 118.2(2) of the Act. Paragraphs 24 to 31 of IT-519R2 Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction set out the Department’s general position regarding Attendant Care Expenses that may qualify as medical expenses under subsection 118.2(2) of the Act.

We offer the above general comments which we hope will be of assistance to you, but caution you that these are not binding on the Department with respect to any proposed transactions.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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