13 September 1995 Internal T.I. 9520497 - 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:

A taxpayer moved from one location to another location. The move involved the sale of his residence and the occupation of a rental unit at the old location and short term accommodation and the construction of a home at the new location. In addition, the taxpayer did not have an employment position at the time of the move although he expected to obtain an employment position in the near future (a few months) in connection with a manufacturing activity that was to be commenced. When the manufacturing activity did not occur, the taxpayer undertook a training program at the new location and subsequently obtained an employment position. This situation involves the 1991 to 1994 taxation years. The issue is whether the taxpayer is entitled to deduct moving expenses.

Position TAKEN:

Yes, he is entitled to deduct moving expenses.

Reasons FOR POSITION TAKEN:

The relevant facts indicate that the taxpayer can be considered to have satisfied the necessary conditions in section 62.

		September 13, 1995

St. John's Tax Centre	HEADQUARTERS
Ms. Kathy Grant	M. Eisner
	Enquiries (TC-98)			(613) 957-8953

		952049

Moving Expenses

This is in reply to your memorandum of August 3, 1995 in which you asked us for our views on whether a certain individual (XXXXXXXXXX) is entitled to deduct moving expenses under subsection 62(1) of the Income Tax Act (the Act). Your submission included a copy of a letter from the individual which sets out the circumstances of his situation.

XXXXXXXXXX

Our Comments

The comments below have been made on the assumption that the 40 kilometre test set out in subsection 62(1) of the Income Tax Act (the Act) has been satisfied. It is also our understanding, pursuant to our telephone conversation on August 29, 1995 (Eisner/Grant), that the individual did not have any employment income in respect of the new work location (i.e., XXXXXXXXXX) for 1993.

In relation to the above circumstances, subsection 62(1) provides, in part, that "where a taxpayer has, at any time, commenced to be employed at a location in Canada and by reason thereof has moved from the residence in Canada at which, before the move, the taxpayer ordinarily resided". It is our view that in order to satisfy this wording, it is not necessary for a taxpayer have obtained an employment position prior to moving to the new residence. Rather, it is only necessary that the taxpayer must have moved for the purposes of obtaining an employment position. Of course, the taxpayer, assuming that he or she did not start a new business at the new location, must also find employment at the new location in the year he or she moved to the new residence or the following year since the taxpayer's moving expenses are only deductible in those years against income from employment at the new work location.

It is a question of fact whether the reason for changing residences by a taxpayer was to begin employment at the new location. In this regard, the taxpayer has indicated that he moved in the expectation of becoming employed in connection with the XXXXXXXXXX

the individual undertook a training program and found employment with a construction company in May of 1994. This information suggests that he did move to XXXXXXXXXX so that he could find an employment position (likely within the XXXXXXXXXX). In such circumstances, it would seem to follow that the new employment position for the purposes of the application of subsection 62(1) of the Act can be regarded as being his employment position with the construction company.

A second consideration is that, under subsection 62(1), a taxpayer who moved to find a new employment position, is only entitled to deduct moving expenses in the "taxation year in which the taxpayer moved from the old residence to the new residence or for the immediately following year". With respect to this wording, it is our view that the term "taxation year" refers to the year in which the move has been completed and that it is a question of fact as to when a taxpayer has moved from one residence at which he or she ordinarily resided to another residence at which, after the move, he ordinarily resided. In relation to these comments, the individual has indicated that he moved to XXXXXXXXXX following the termination of his employment with XXXXXXXXXX and that he moved into the home in early February of 1993. While the taxpayer's letter makes no mention of accommodation while the home was being constructed, it seems reasonable to presume that he occupied temporary accommodation during that time period. In such circumstances, it seems to us that the residence at which he ordinarily resided after the move would be the home that he constructed on the lot purchased in 1991. We also note that these comments are consistent with paragraph 62(3)(a) which makes reference to temporary accommodation near the new residence.

The last consideration concerns whether the selling costs ($XXXXXXXXXX) in respect of his residence sold in September of 1991 are deductible. In relation to these costs, subsection 62(1) describes an employment related move in which a taxpayer has moved from a residence (the old residence) in which he or she ordinarily resided to a new residence and refers to "moving expenses incurred in the course of moving from the old residence to the new residence". In addition, paragraph 63(2)(e) refers to "the selling costs in respect of the sale of the old residence". In connection with these comments, it is our view that if the "old residence" is considered to be the rental unit he occupied following the sale of his home until November of 1991, the costs would not be deductible. On the other hand, if the home sold in September of 1991 is considered to be the "old residence", the costs would be deductible.

In relation to this issue, the individual sold his home after he was advised by XXXXXXXXXX that he would lose his job within a year or so and purchased a lot in XXXXXXXXXX in November of 1991. The home was apparently sold in contemplation of moving to XXXXXXXXXX with the expectation of finding a job within the XXXXXXXXXX As the home sold much faster than expected, he occupied the rental unit for approximately a year. Shortly after he lost his job with XXXXXXXXXX in November of 1992, he proceeded to go to XXXXXXXXXX(in the hopes of obtaining a job within the XXXXXXXXXX) and constructed a home on the lot he purchased. As a consequence of these circumstances, it seems to us that the sale of the home was employment related, that this home can be regarded as being his "old residence" for the purposes of subsection 62(1) and paragraph 62(3)(e), and that the period of time he occupied the rental unit was temporary (i.e., the occupation of the rental unit simply accommodated the move from the home he sold in New Brunswick to XXXXXXXXXX).

We also wish to mention that our comments are provided solely on the basis of the information set out in the individual's letter you submitted. On the basis of the information provided, his moving expenses could be allowed with respect to the 1994 taxation year to the extent of his employment income for that year from the construction company.

In connection with the comments in the preceding paragraph, we also wish to note that on page 2 of the individual's letter, it is indicated that he incurred costs of $XXXXXXXXXX (Legal fees and Deed transfer) in connection with the acquisition of the lot purchased in November of 1991 as well as costs (Legal fees) of $XXXXXXXXXX incurred in connection with the financing of the construction of the home. As indicated in our telephone conversation on August 29, 1995, it is questionable whether these expenses qualify as moving expenses for the purposes of subsection 62(3). However, as the individual's total employment income is approximately $XXXXXXXXXX and the total of the moving expenses are in excess of $XXXXXXXXXX, it is not necessary to comment on the deductibility of these expenses.

Should you require further technical assistance, we would be pleased to provide our views.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch