118.2(2)(E) | Canadian Tax Decisions & Tax Law

Medical Expense Tax Credit – Cord Blood

Shapiro v The Queen, 2014 TCC 74

At issue was whether the processing and storage of cord blood was an eligible medical expense to allow for a credit pursuant to 118.2(1) of the Income Tax Act.

The Court concluded that cord blood was eligible for the medical expense tax credit were it is “prescribed” by a medical professional. Here, the appeal failed because the evidence did not show that the medical practitioner had a role in recommending the procedure, but rather it was the parents who made the decision on their own.

FACTS

The Appellant gave birth in 2009 and, having a family history of cancer, chose to store her child’s cord blood at a lab operated by a for-profit private enterprise (Progenics). in 2009 and 1010 the child was healthy and the cord blood was not needed to treat an illness.

ANALYSIS

The appellant argued that the cord-blood-banking fell within paragraph 118.2(2)(o), which includes “laboratory, radiological, or other diagnostic procedure or service [… for maintaining health, preventing disease or assisting in the diagnosis or treatment [.. .] as prescribed by a medical practitioner or dentist” as a medical expense.

The Court identified 4 conditions for this paragraph to apply:

[9]             Four conditions must be satisfied in order for an expense to be deductible under this provision. The expense must be incurred:

(a)     in respect of a laboratory, radiological or other diagnostic procedure or service together with necessary interpretations;

(b)     for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness or disability;

(c)      for the patient; and

(d)     as prescribed by a medical practitioner.

The court held that:

Given the ambiguity of the phrase “together with any necessary interpretations”, the storage of placental or cord blood stem cells qualifies as a medical procedure or service similar in nature to laboratory or radiologists test (para 11);
The second condition d does not require the person to be sick or to wait to be diagnosed, or have to be genetically predisposed to an illness – but the question is whether the extracted stem cells would ever be needed to treat an illness;
The person need not be a “patient” in that the person is suffering from an illness during the taxation year in question, and the provision allows for deductions to maintain health and prevent disease;
the requirement of having a medical practitioner direct or recommend the procedure is NOT met by having a medical practitioner perform the procedure.

In this case, the final condition was not met because the evidence showed that the parents made the choice to have cord blood extracted on their own, and not on the recommendation of a medical practitioner.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Deduction of Tuition Fees as Medical Expenses

Karn v The Queen, 2013 TCC 78

At issue was what counts as a “certificate” as required by paragraph 118.2(2)(e) of the ITA.

ANALYSIS

The TCC referred to the decision of Justice Campbell Miller in Lang v. The Queen, 2009 TCC 182, where it was stated that a ‘certificate’ is required, which “improperly implies that a document, report or some other written format must be produced” (para 4). The provision itself uses the phrase “who has been certified”, which implies that any format will be sufficient, including the “preferable method of oral testimony of a properly qualified individual in court” (para 4).

The certificate need not be in any particular form, but must be a “true certification” (Scott v. The Queen, 2008 FCA 286), by at least specifying “the mental or physical handicap from which the patient suffers, and the equipment, facilities or personnel that the patient required in order to obtain the care or training needed to deal with the handicap” (Title Estate v. The Queen, 2001 FCA 106). This can be achieved through a combination of documents (Lucarelli v. The Queen, 2012 TCC 301). The “the certification need not contain the phrase ‘physical or mental handicap’, there must, however, be no doubt that a reasonable person, looking at that certification, would reasonably conclude that the qualified professional has declared or positively identified the physical or mental handicap from which the individual suffers.” (para 22).

In this case, one of the reports identified a learning disability. However, not all learning disabilities qualify as a mental handicap. However, the report stated that the patient needed placement in a specialized school which “provides specialized teacher training and very specific individual program plans, optimizes the teacher to student ratio and provides a high level of individualized support” (para 22). The word “need” is equivalent to “require” (para 24).

Additionally, the TCC stated that “the certification is met where the enrollment in a specialized school that meets the accreditation requirements of the province will suffice without dictating the specific specialized school that” the patient is required to attend (para 25).

Finally, the court dealt with the timing of the certification – whether it was required before the expense is incurred. The court stated that all that is needed is that the certification requirement is met before the returns are filed (para 26).

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Income Tax – HST/GST – International Tax

Canadian Tax Decisions & Tax Law

Category Archives: 118.2(2)(e)

Medical Expense Tax Credit – Cord Blood

Karn v The Queen, 2013 TCC 78

Income Tax – HST/GST – International Tax