Should taxpayers be able to deduct travel expenses to warmer climates as medical expense tax credits (METCs) to alleviate pain and suffering?
Our legal researcher, Greer Jacks, found an interesting case, Tallon v. The Queen, which considered just that and in the process allowed the taxpayer a lucrative winter holiday bonus. Here’s what happened:
The taxpayer suffered from chronic pain and was prescribed by her doctor to live in a warmer climate than Canada can offer in the winter. After an appeal to the Court, the appellant was successful in claiming expenses in her 2008 taxation year, but her claim of $17,494.50 as METCs in her 2009 taxation year for her and her spouse to travel to Thailand and Indonesia was denied by the Canada Revenue Agency.
At trial, the Crown alleged that the appellant’s doctor’s certificate was insufficient, a complaint that was not made in 2008. In order to successfully claim METCs under subsections 118.2(2)(g) and (h) of the Income Tax Act, the medical services must not be available in the local community, the route taken must be a direct route, and it must be reasonable for the taxpayer to travel to that place to obtain the services. The claim can include the expenses for another if there is a medical certificate stating that the patient cannot travel alone.
The Honourable Justice Judith Woods was concerned that she was not provided with the reasons for judgment (given orally) in the appellant’s 2008 decision, but was only given cases by Crown counsel that sought to distinguish that decision. When Crown counsel offered to arrange for a transcript of the oral reasons subsequent to the hearing, Justice Woods stated that in this particular case the additional time and cost were not justified (it was a hearing under the informal procedure that was heard in Toronto rather than Thunder Bay for the purposes of an expedited decision).
Although finding in the appellant’s favour, Justice Woods shared a little skepticism about the claim in her concluding remarks. At paragraph 27 she said:
“Before concluding, I would mention that I am troubled about the number and location of countries that Ms. Tallon and her spouse have visited over the years, which are mentioned above. This leaves me with the impression that these locations were not chosen only for medical reasons. I leave this issue for another day because the Crown did not argue that the reasonableness requirement in s. 118.2(2)(v) was not satisfied.”
What do you think? Should these expenses have been allowed? Or was this an $18,000 vacation on the taxpayers dime. Post your thoughts on our Facebook page.
Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management” Follow Evelyn on Twitter at @EvelynJacks.