Shapiro v. R. – TCC: Storage of cord blood not an allowable medical expense tax credit

Bill Innes on Current Tax Cases

http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/67216/index.do New Window

Shapiro v. The Queen[1] (March 7, 2014) involved a taxpayer who claimed medical expense tax credits for the costs of storing her child’s cord blood:

[3]             The Appellant gave birth to a child in 2009. Given the Appellant’s family’s history of cancer, the Appellant and her husband chose to investigate cord blood banking.

[4]             In general terms, cord blood banking involves collecting stem-cell-containing blood from the child’s umbilical cord and the placenta after delivery. The cord blood is then processed and stored for potential use. Cord blood can be used in stem cell therapy and in the treatment of diseases of the blood such as leukemia.

[5]             The Appellant chose to store her child’s cord blood at a hematology laboratory operated by Progenics.

[6]             Progenics is a for-profit private enterprise.

[7]             In 2009 and 2010, the Appellant’s child was healthy and the cord blood was not required in order to treat an illness.

The court held that the paragraph 118.2(2)(o) of the Income Tax Act[2] set out four requirements for the tax credit:

[8]             The Appellant argues that cord-blood-banking expenses fall within paragraph 118.2(2)(o) of the ITA. This provision refers to a medical expense:

118.2(2)(o) for laboratory, radiological or other diagnostic procedures or services together with necessary interpretations, for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness or disability, for the patient as prescribed by a medical practitioner or dentist;

                                                                       [Emphasis added (by Court).]

[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.

While the court held that the first three requirements were met, there was no evidence of the procedure being prescribed by a medical practitioner:

[15]        The Appellant’s obstetrician was not called at the hearing. There was no evidence emanating from the Appellant’s obstetrician to suggest that the procedure was directed or recommended by that physician.

[16]        During oral argument, counsel for the Appellant suggested that, because the Appellant’s obstetrician extracted the cord blood, it must be inferred that that physician prescribed the processing and storage of the cord blood.

[17]        I do not agree with this interpretation. In my opinion, “prescribed” means that the procedure or service must be recommended by the medical practitioner. The evidence shows that the Appellant and her spouse made a choice on their own to have their child’s cord blood processed and stored. They did so because of a family history of cancer. The evidence shows that the Appellant and her spouse researched private cord blood banks and chose Progenics to provide the cord blood processing and storage facilities. The Appellant has failed to persuade me that the obstetrician had a role in recommending the cord blood processing and storage.

Accordingly, the appeal was dismissed.

[1] 2014 TCC 74.

[2] R.S.C. 1985, c. 1 (5th Supp.).