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TAXFlash News from IncomeTaxCanada.net
:: CCRA wants to slam door shut on certain Medical Expense Claims
:: Jim Maroney, February 1, 2004 :: Given the recent spate of obesity stories cropping up in the media, it seems somewhat ironic that the Canadian court system should be ruling on an issue concerning health food. But take a look around and you'll notice of proliferation of health food products. If you've got a health problem, however rare, theres bound to be some organic or natural product available to set it right. A trip to a health food store or even your local grocery store will reveal a host of products with names that defy pronunciation – products said to work miracles where conventional medicine has failed. In recent years, CCRA has witnessed a significant increase in taxpayers claiming organic or natural products and the like as qualifying medical expenses for purposes of the medical tax credit. Not surprising, CCRA wants to slam this door shut and fast which is why Canadian courts have been brought into the fray. The appellant in the case at issue sought to include certain “medical” expenses in the calculation of his income tax liability for the 2001 taxation year. The expenses at issue included $5,844.68 of vitamins, herbal remedies and supplements etc. purchased from the taxpayer’s naturopathic physician. Digressing for a moment, there’s a clear conflict of interest here wherein one individual is empowered to diagnose, prescribe treatment and profit from the sale of products used in that treatment. Paragraph 118.2(2)(n) of the Income Tax Act, (Canada) allows a medical expense claim “for drugs, medicaments or other preparations or substances (other than those described in paragraph (k)) manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder, abnormal physical state, or the symptoms thereof or in restoring, correcting or modifying an organic function, purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist”.
Too Much Money Involved for CCRA to ignoreRepresenting himself, the taxpayer focused on the phrase “as recorded by a pharmacist” in presenting his defence. Presenting a letter dated no less than 18-months after the taxation year at issue and signed by a pharmacist, “recording” the subject medical products, the taxpayer argued that the “recorded by a pharmacist” requirement of the Act had been satisfied. One can only hope that the prescribed medical products included some form of vision treatment to correct the taxpayer’s case of wilful blindness in ignoring the pharmacist’s disclaimer at the bottom of her letter where she stated: 'I did not prepare, dispense or supply any of the items listed above. None of these items was supplied from a licensed pharmacy. I was not involved at all in the treatment of this individual.' Making short shrift of the taxpayer’s flimsy case, the Court noted “the use of the word "recorded" in paragraph (n) is in the past tense and is used conjunctively in the paragraph. The meaning is, therefore, that together, at the appropriate times the items must be prescribed by a medical practitioner and conjunctively recorded by a pharmacist as part of the prescription process ending in the taxation year in question”. End of story, case dismissed. This case follows closely on the heals of another case before the Federal Court of Appeal wherein a taxpayer sought to receive a tax credit for grocery purchases from health food stores. Suffering from chronic fatigue syndrome, chemical sensitivity and immune dysfunction syndrome. The taxpayer’s medical doctor prescribed a diet consisting of organic, chemical free products of the type typically found at health food stores. Although the treatment had been prescribed by a medical doctor, the products purchased had not been “recorded by a pharmacist” (there’s that phrase again!) and the Court of Appeal sent the case back to the Tax Court of Canada for consideration. Going 0 for 2 heading into the new year, the case for health food products as legitimate medical expenses does not look good. I suspect, however, that this won’t be the last we hear of the matter. There’s simply too much money involved in the health food industry to expect this issue to disappear from the income tax radar screen.
Free Tax Advice Article Submitted to Income Tax Canada.net exclusively by Jim Maroney Official details about this and other topics on income taxes can be found in English & Francais at www.ccra-adrc.gc.ca Income tax information offered by www.IncomeTaxCanada.net is done so without endorsement by Canada Revenue Agency (CRA) - l'Agence du Revenu du Canada (ARC) (formerly Canada Customs and Revenue Agency - l'Agence des Douanes et du Revenu du Canada CCRA-ADRC and formerly Revenue Canada – Revenu du Canada) or any Canadian government agency. The free advice is of a general nature for Canadian taxpayers seeking legal ways to reduce their personal and small business income taxes payable to the federal and provincial (or territorial) governments in Alberta, British Columbia, Manitoba, New Brunswick Newfoundland-Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan or Yukon. Specific taxation situations vary from taxpayer to taxpayer, province to province, territory to territory. The free tax advice here is only a general guide. Canadians should always seek individual guidance on accounting rules and tax laws from knowledgeable accountants and lawyers. To prepare your income tax return online and NetFile your Canadian income taxes electronically in English or Francais, please visit www.ufile.ca or www.impotexpert.ca websites. Additional information on financial products and services for Canadians can be found at www.CanadianCreditCenter.com. |
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Jim Maroney