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. Deductibility of moving expenses?

2. Deductibility of automobile expenses?

Position:

1. Not deductible.

2. Some portion may be deductible.

Reasons:

1. Personal in nature. The purpose of the move was not to enable the client to work at the new work location, as required by subsection 62(1) of the Act.

2 More details needed to determine if expenses are deductible.

            April 18, 2001

      Judy Dawe   HEADQUARTERS
      Post Review Allan Nelson, CMA
St. John’s Taxation Centre    (613) 443-7253

2001-006804
XXXXXXXXXX

Moving Expenses and Automobile Expenses

We are writing in response to your request sent by facsimile to us dated February 2, 2001, and our telephone conversations (Nelson/Dawe), wherein you asked for our comments concerning the deductibility of moving and automobile expenses claimed by XXXXXXXXXX (the “Client”).

Background

Our understanding of the facts is as follows:

• The Client was a senior executive and shareholder of XXXXXXXXXX from which he received a T4 in XXXXXXXXXX.
• The Client was, and is, the sole shareholder of a holding company called XXXXXXXXXX was, and is, a shareholder in XXXXXXXXXX.
• In XXXXXXXXXX, other outside parties invested in XXXXXXXXXX and the Client resigned his senior executive position.
• In XXXXXXXXXX, the Client moved from XXXXXXXXXX to XXXXXXXXXX. As a result of this move, XXXXXXXXXX [the Client’s holding company] was moved with him. Before and after the move, XXXXXXXXXX address was the same as the Client’s home address.
• The Client claimed moving expenses of $XXXXXXXXXX on his XXXXXXXXXX T1 Return. The majority of these expenses were for real estate sales commissions, presumably paid for the sale of his house in XXXXXXXXXX. The Client’s accountant provided a letter stating the reason for the move was to change his work location.
• XXXXXXXXXX.
• XXXXXXXXXX.
• The Client also claimed office in the home for XXXXXXXXXX and automobile expenses for XXXXXXXXXX.
• The Client is the President of XXXXXXXXXX and stated that he was employed full time by XXXXXXXXXX did not have any other employees.
• XXXXXXXXXX.
• The Client filed a T2200 (signed by the Client as an officer of his employer, XXXXXXXXXX) stating that the Client is required to travel to XXXXXXXXXX as part of his work.

Your Views

In your view, the Client’s moving and automobile expenses were personal in nature and should be disallowed. This is so, since he did not move to start a new job or business. Further, since XXXXXXXXXX is the Client's investment holding company, with no other employees, there does not appear to be any requirement for him to use his automobile for employment purposes.

Your Questions

You have asked us whether or not the Client is entitled to claim moving expenses for XXXXXXXXXX and automobile expenses for XXXXXXXXXX.

Our Comments

All of the information needed to address your questions is not yet available. However, it was agreed that we would provide our comments based on our understanding of the facts that you have provided.

Moving Expenses

To claim a deduction for moving expenses, subsection 62(1) of the Income Tax Act (the “Act”) [as it read for the XXXXXXXXXX taxation year] requires, inter alia, that the taxpayer’s commencement of employment at the “new work location” must be the reason for the move from the “old residence” to the “new residence”.

Further, paragraph 14 of Interpretation Bulletin IT- 178R3 (Consolidated) refers to section 67 of the Act and states that the amount deductible under section 62 of the Act must be reasonable in the circumstances. Paragraph 15 of the same Bulletin states, in part, that eligible moving expenses are deductible only when the reason for the residential move is to begin employment at the new work location.

Since the Client operated XXXXXXXXXX out of his home, when the Client moved XXXXXXXXXX moved with him and it appears that he commenced to be employed at the new work location. However, this fact alone does not entitle the Client to deduct moving expenses. It is the purpose of the move that must be looked at and this involves a question of fact.

We are not aware of any evidence to demonstrate that the Client’s move from XXXXXXXXXX to XXXXXXXXXX was made to enable him to be employed at the new work location. In fact, the question remains as to what work related reason the Client would have to move from XXXXXXXXXX to XXXXXXXXXX, when his T2200 indicated that he would be required to travel to XXXXXXXXXX for work purposes [possibly to do consulting work for his prior employer, XXXXXXXXXX . See comments on this point below under the “Automobile Expenses” subheading].

Consequently, based on the facts provided, it is our view that the Client would not be entitled to claim moving expenses in XXXXXXXXXX. Any such claim would be unreasonable and would not meet the purpose test in subsection 62(1) of the Act.

Automobile Expenses

The Client has not provided sufficient information to support his claim for automobile expenses. However, in order to give the Client opportunity to corroborate his position, we suggest that he be asked for additional details and documentation concerning the specific usage of his automobile. XXXXXXXXXX Reference is made to paragraphs 31 to 35 of Interpretation Bulletin IT- 522R for further guidance on this point.

We hope the above will be of assistance to you.

If you have any additional queries on this matter please feel free to contact us.

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. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Milled Azzi CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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