When you’ve had a child prior to now 20 years, you will have been given the choice of gathering and storing your child’s wire blood through the start. Whereas it’s unlikely that your personal child will ever have the ability to use its personal banked wire blood, the blood might assist a sibling with an sickness resembling leukemia, sickle cell illness, or Hodgkin’s lymphoma that might be handled with a stem cell transplant.
However banking your child’s wire blood will be costly. Charges begin at about $1,400 to $2,000 for the preliminary assortment and processing. Then, annually, the personal wire blood financial institution will cost an annual payment of a pair hundred for annually the blood is saved. Some wire blood banks cost as a lot as $10,000 upfront for lifetime storage.
Over the previous 20 years, varied taxpayers have written to the Canada Income Company asking whether or not the price of the preliminary wire blood assortment together with the annual banking charges could be eligible for the non-refundable federal and provincial medical expense tax credit score (METC). The CRA’s longstanding response has been that these charges will not be eligible because the bills “don’t contain a right away medical situation or sickness, slightly they’re preventive in nature.”
However what a couple of state of affairs the place a physician has advisable the gathering and storage of wire blood within the case of a household with a historical past of diabetes? Offspring of diabetic dad and mom, and people of diabetic fathers particularly, have the next cumulative danger of contracting diabetes than the overall inhabitants. In such a state of affairs, would the charges be thought of a legitimate medical expense for the aim of the METC?
Simply such a case got here earlier than the Tax Court docket this summer season. The case concerned a mom who tried to say $5,720 of bills as a way to harvest and retailer stem cells from her umbilical wire when she gave start to her second son. The taxpayer’s husband, who represented his spouse on the listening to, is a Sort I diabetic.
On account of the husband’s medical situation and after consulting with their obstetrician, they determined to go forward with the harvesting and storage process. They claimed the expense on their 2016 tax return, which the CRA denied.
Underneath the Revenue Tax Act, you may declare medical charges paid “for laboratory, radiological or different diagnostic procedures or providers along with mandatory interpretations, for sustaining well being, stopping illness or aiding within the prognosis or therapy of any harm, sickness or incapacity, for the affected person as prescribed by a medical practitioner or dentist.”
In different phrases, to fulfill the take a look at for deductibility, there are 4 situations that should be happy. First, the expense should be for a laboratory, radiology or diagnostic exercise. Second, it should be undertaken to take care of well being, forestall illness or diagnose or deal with harm, sickness or incapacity. Third, it should be for the affected person and eventually, it should be prescribed by a medical practitioner.
The choose cited a 2014 choice additionally involving the harvest and storage of stem cell blood, which discovered that the primary factor was happy as a result of the harvesting and storage have been just like different laboratory procedures and providers. The second situation can also be happy as a result of the process “anticipates sustaining well being and aiding within the therapy of sickness, no matter whether or not such sickness is subsisting or potential.” Thirdly, just like the second situation, potential sickness the place doable for the supposed affected person, is enough.
As to the ultimate situation, the 2014 choice discovered that “prescribed signifies that the process or service should be advisable by the medical practitioner.” That was the problem to be determined within the present case.
The taxpayer testified that they determined to gather their son’s wire blood “because of a verbally communicated suggestion from their obstetrician.” Whereas the recommending obstetrician didn’t testify in court docket, the taxpayer’s husband said that the physician made a word of this suggestion in her scientific notes. The scientific notes weren’t produced in court docket.
As an alternative, a letter from a household physician, dated Oct. 16, 2017, was “adduced into proof as proof of the prescribed therapy.” It said that “the above affected person’s dad and mom are storing his wire blood for future use as an sickness over the overall inhabitants. All sufferers are suggested to do that, if doable, from start.”
The taxpayer argued that the verbal suggestion by the obstetrician on the time of or simply earlier than start mixed with the letter from the household physician “kind conjunctively a prescription from a medical practitioner.”
The choose didn’t give a lot weight to the verbally communicated obstetrician “directive,” expressed on the time of the stem cell harvest. Apart from the verbal testimony of the taxpayer’s husband, there was no proof of “its content material, specificity or impact on the time it was made.” As well as, the obstetrician didn’t testify and her scientific notes weren’t produced.
The choose additionally felt that the letter from the household physician, written some 17 months after the process, “can not present proof of a medical prescription undertaken by the (taxpayer) in 2016.” Because the choose wrote, “The letter is a retrospective descriptive file of what the taxpayer did, why and on what foundation. Though it identifies an elevated danger, it additionally displays a generic suggestion that such a process is advisable for all sufferers.”
In denying the taxpayer’s METC declare, the choose made a last remark regarding the primary function behind the regulation. He wrote, “Greatest practices will not be captured throughout the ambit of (the METC). The supply creates a deduction for medical bills incurred by a taxpayer for medical remedies and therapies prescribed to deal with that taxpayer’s current and future illnesses. It’s not supposed to create a deduction for generic and undiagnosed population-wide sickness and illness.”
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Property Planning with CIBC Monetary Planning & Recommendation Group in Toronto.