25 May 2001 External T.I. 2001-0078295 - moving expenses

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Deductibility of various moving expenses. Meaning of ordinarily resided.

Position: General Comments

Reasons: General Comments

								2001-007829
XXXXXXXXXX 							Karen Power, C.A.
(613) 957-8953
May 25, 2001

Dear XXXXXXXXXX:

Re: Moving Expenses

We are writing in reply to your letter of March 30, 2001 wherein you request our views on whether the taxpayer described in your letter would be entitled to claim certain moving expenses on his 1999 and 2000 personal income tax returns.

Please note that the confidentiality provisions of the Income Tax Act (the "Act") prohibit us from discussing the tax affairs of a particular taxpayer without the taxpayer's written authorization. In addition, enquiries concerning the tax implications relating to particular completed transactions should be addressed to the relevant tax services office. However, we can provide the following general information which may be of assistance.

Subsection 62(1) of the Act provides that, subject to certain conditions and limits, a taxpayer may deduct moving expenses paid in respect of an eligible relocation. We have enclosed a copy of Form T1-ME(00) and Interpretation Bulletin IT-178R3 (Consolidated), which explain the conditions and limitations regarding the moving expenses deduction.

The term "eligible relocation" is defined in subsection 248(1) of the Act. This definition provides, in part, that the relocation must occur to enable the taxpayer to be employed at a new work location in Canada, both the residence at which the taxpayer ordinarily resided before the relocation and the residence at which the taxpayer ordinarily resided after the relocation are in Canada, and the new residence is located at least 40 kilometres closer to the new work location than the old residence was.

As noted above, one of the requirements to qualify as an "eligible relocation" (and, therefore, for moving expenses to be deducible) is that the taxpayer must move from a residence at which the taxpayer "ordinarily resided" before the move, to a residence at which the taxpayer "ordinarily resided" after the move. For purposes of the moving expense deduction, the courts have generally taken the view that a person is ordinarily resident in the place where, in the settled routine of his or her life, he or she regularly, normally, or customarily lives and should be contrasted with special or occasional or casual residence.

While the determination as to where a person is ordinarily resident is ultimately a question of fact, where an individual is living in temporary accommodation, such as a hotel or motel, we would generally conclude that they are not ordinarily resident at the new location for purposes of the moving expense deduction. In our view, where an individual has failed to establish ordinary residence in a new work location in a particular taxation year, the individual would not have an eligible relocation for that taxation year. However, once the individual establishes an ordinary residence at a qualifying new location, the individual would likely be entitled to a deduction for moving expenses to the extent provided in section 62 of the Act (and explained in Form T1-ME(00) and IT-178R3 (Consolidated)).

Subsection 62(3) of the Act lists expenses which qualify as moving expenses. The expenses which may or may not qualify as moving expenses are also explained in Form T1-ME(00) and in paragraphs 12 to 16 of IT-178R3 (Consolidated). In our view amounts paid for temporary accommodation at a location where an individual has not established that he or she is ordinarily resident would not qualify as a moving expense for the purposes of section 62 of the Act. However, as described in paragraph 12 of IT-178R3 (Consolidated), the following amounts will generally qualify as eligible moving expenses:

(a) traveling costs, including reasonable amounts for meals and lodging, in the course of moving the taxpayer and members of the household;

(b) transportation and storage costs for household effects;

(c) the cost of up to 15 days of temporary lodging near either residence;

(d) selling costs relating to the sale of the taxpayer's old residence, including advertising, legal fees, real estate commissions; and

(e) legal fees relating to the purchase of the taxpayer's new residence.

While, as noted above, we are unable to comment on the specific situation described in your letter, we trust that our general comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch