2 March 2001 External T.I. 2000-0055105 - 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:

1. In respect of an otherwise eligible relocation (ITA 248(1)) where the taxpayer moved for three months into a rental home at the new work location pending the sale of the old residence and then, after the sale, purchased a new residence, is a portion of the rental accommodation deductible in computing income under ITA 63(2)(c)?

2. Are the costs of weekend commuting back to the old residence, where the taxpayer's family resided while it was listed for sale, qualify as deductible expenses under ITA 63(2)(a)?

Position:

1. Yes
2. No

Reasons:

1. ITA 63(2)(c) permits the deduction of the cost of lodging near the old residence or the new residence for a period not exceeding 15 days.

2. ITA 63(2)(a) only permits the deduction of travel costs in the course of moving from the old residence at which the taxpayer ordinarily resided before the relocation to a new residence at which the taxpayer ordinarily resided after the relocation.

		March 2, 2001

	Toronto West Tax Services Office	Headquarters
Mr. J. Jackson	S. Parnanzone
	Director-Taxation	Tel. (613)957-2133

2000-005510

Moving Expenses

We are forwarding the letter dated August 10, 2000, which XXXXXXXXXX, wrote to your office asking for an adjustment to the tax return of XXXXXXXXXX (the "Taxpayer"). The letter was received by your office on August 17, 2000, and then forwarded to and received by us on November 7, 2000. It is unclear if the letter was redirected to our office by error or with the intention to obtain our views on the accountant's adjustment request. We shall assume the latter reason and offer the comments set out below for consideration during the review of the Taxpayer's tax return to be made by your office. For your information, we have advised XXXXXXXXXX by telephone that your tax services office will be responding to her.

Our understanding of the facts is as follows:

The Taxpayer, who has two children, relocated from XXXXXXXXXX to XXXXXXXXXX for a new job which she started in XXXXXXXXXX, she listed for sale her old residence in XXXXXXXXXX and moved into a rental home in XXXXXXXXXX. While the old residence was listed for sale, the Taxpayer's two children and her mother continued to live in it, as the Taxpayer did not want to leave the house vacant. The XXXXXXXXXX residence sold in XXXXXXXXXX and the Taxpayer purchased a new residence in XXXXXXXXXX in the same month. We presume that the Taxpayer's family relocated to and moved into the new residence in XXXXXXXXXX in XXXXXXXXXX.

During the period when the old residence was listed for sale, the Taxpayer spent the weekdays in XXXXXXXXXX and commuted back to XXXXXXXXXX every weekend to be with her family.

The accountant has requested that her client be allowed to deduct in computing her income:

• a portion of the rental expense incurred in XXXXXXXXXX as a moving expense under paragraph 62(3)(c) of the Income Tax Act (the "Act"); and
• the weekly commuting costs between XXXXXXXXXX and XXXXXXXXXX as a moving expense under paragraph 62(3)(a) of the Act.

Our comments

As discussed in Interpretation Bulletin IT-178R3, Moving expenses, a taxpayer may deduct "moving expenses" in respect of an "eligible relocation". The types of "moving expenses" a taxpayer may deduct are listed in subsection 62(3) of the Act.

As defined in subsection 248(1) of the Act, an "eligible relocation" generally speaking is a relocation, when its reasons are to carry on business or be employed at a new work location, from an old residence at which the taxpayer ordinarily resided before the relocation to a new residence at which the taxpayer ordinarily resides after the relocation, provided the move brings the taxpayer at least 40 km closer to the new work location.

Based on the described facts, the Taxpayer's relocation from XXXXXXXXXX to XXXXXXXXXX qualifies as an eligible relocation.

Whether the Taxpayer's relocation to XXXXXXXXXX occurred in XXXXXXXXXX, when she moved into the rental home, or in XXXXXXXXXX, when she purchased her new residence depends on which of the two accommodations in XXXXXXXXXX, the rental home or the purchased home, can be considered as the new residence at which the Taxpayer ordinarily resided after the relocation. Determining which of the two homes should be regarded as the residence at which the Taxpayer ordinarily resided after the relocation is a question of fact to be resolved by taking into consideration all the circumstances surrounding the move. However, based on the described facts, it appears to us that the Taxpayer's new residence at which she ordinarily resided, with her family, after the move was the purchased home and that the rental home was simply temporary accommodation (see paragraph 18 of IT-178R3). Accordingly, it is our view that the Taxpayer's relocation from XXXXXXXXXX to XXXXXXXXXX occurred in XXXXXXXXXX.

Under paragraph 62(3)(c), a taxpayer may deduct the cost of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer's household for a period not exceeding 15 days. Since the Taxpayer's new residence in XXXXXXXXXX at which she ordinarily resided after the move was the purchased home (as discussed above), it would appear that the Taxpayer is entitled to deduct a reasonable portion of the rental accommodation, for a period not exceeding 15 days.

Under paragraph 63(2)(a) of the Act, a taxpayer may deduct travel costs (including a reasonable amount expended for meals and lodging) in the course of moving the taxpayer and members of the taxpayer's household from the old residence to the new residence. Based on the described facts, it is our view that the Taxpayer's weekend commuting costs back to XXXXXXXXXX cannot be regarded as travel costs in the course of moving from the old residence in XXXXXXXXXX to the new residence (i.e., the purchased home) in XXXXXXXXXX at which the Taxpayer ordinarily resided after the relocation.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613)994-2898. A copy will be sent to you for delivery to the client.

M. Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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