Tax Tips & Pits – Courts don’t joke around when it comes to taxes

"So how does a tax preparer spend his or her free time? Reading court rulings, of course."

So how does a tax preparer spend his or her free time? Reading court rulings, of course.

April Fool’s Day aside, no joke, reading court rulings can be entertaining.

That being said, in no way am I downplaying the significance and seriousness of anyone’s health and medical issues they may be enduring, but here is a legal challenge that might make you smile … and then say … if only.

To set the stage, and keeping things simple, for medical services that require travel out of one’s local area, Canada Revenue Agency (CRA) permits travel costs as an allowable medical expense.

The needed medical service must not be available locally as defined by having to travel more than 40 kilometers to another location to receive that medical service.

In a 2015 court case that worked its way to the Federal level, the claiming of travel out of the local area for a necessary medical service was put to the test.

A taxpayer with an undisputed diagnosed debilitating medical condition that had led to the replacement of joints with prosthetic devices was seeking warmer conditions to alleviate the personal suffering created by the prosthetics because of Canada’s cold winter climate.

To provide the relief needed for this medical condition, the taxpayer traveled to Thailand and Indonesia and claimed the travel cost as medically necessary expenses on the T1 personal tax return.

The claim was denied by CRA.

The tax payer appealed to the Tax Court of Canada where the claim was deemed allowable and reinstated by that Court.

CRA then appealed the Tax Court’s decision to the Federal Court of Appeal where that Court ruled in favour of CRA stating that a more favourable climate cannot be defined as a “medical service”.

The taxpayer’s medical claim for travel expenses was denied.

I’m not passing judgement on the Appeal Court’s decision, but given the annual migration of Canadian snowbirds, it’s interesting to ponder about the number of new medical claims that may have resulted if the Court had sided with the taxpayer and allowed the travel claim to a warmer climate.

This legal challenge reminds me of a court case a few years back that eventually led to the denial of a new hot tub purchase as a medical expense.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.