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.
(1) Whether the reimbursement of moving expenses gives rise to a taxable benefit to the employee receiving the reimbursement.
(2) Whether the employee is entitled to claim moving expenses.
Position: (1) Yes.(2) No.
Reasons: The move is not an "eligible relocation" within the meaning thereof in subsection 248(1) of the Act. Therefore, the reimbursement of the moving expenses gives rise to a taxable benefit to the employee pursuant to paragraph 6(1)(a) of the Act and the moving expenses are not deductible in computing taxable income because they do not meet the requirements in subsection 62(1) of the Act.
XXXXXXXXXX A. Seidel, CMA
February 25, 2002
Re: Relocation Expenses
This is in response to your letter dated February 6, 2002 concerning the tax implications of an amount received by an employee from an employer as reimbursement of moving expenses.
The particular circumstance on which you have asked for our views relates to a factual situation and completed transactions. The details of the completed transactions, including all relevant facts and documentation, should be submitted to the appropriate tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.
Paragraph 6(1)(a) of the Income Tax Act (the "Act") includes in an employee's income the value of certain benefits received in the year "in respect of, in the course of, or by virtue of" an office or employment. Subject to the comments below, this could include an amount paid to an employee as a reimbursement of moving expenses.
An "eligible relocation", within the meaning thereof in subsection 248(1) of the Act, requires, amongst other things, that the relocation occur to enable the taxpayer to be employed at a new work location in Canada, that the residence at which the taxpayer ordinarily resided before the relocation and the residence at which the taxpayer ordinarily resided after the relocation be in Canada and that the new residence be located at least 40 kilometres closer to the new work location than the old residence was.
As stated in paragraph 35 of Interpretation Bulletin IT-470R (Consolidated) - Employees' Fringe Benefits ("IT-470R"), where an employer reimburses an employee for the expenses incurred by the latter in moving the employee and the employee's family and household effects either because the employee has been transferred from one establishment of the employer to another or because of having accepted employment at a place other than where the former home was located, this reimbursement is not considered as conferring a taxable benefit on the employee.
As noted above, one of the requirements of an "eligible relocation" is that the taxpayer 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 that it should be contrasted with a special or an occasional or a 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. Where an individual has failed to establish where they "ordinarily reside" in respect of a new work location, the individual would not have an eligible relocation for that particular taxation year. In such a situation, any reimbursement of moving expenses may be a taxable benefit pursuant to paragraph 6(1)(a) of the Act. Nevertheless, it is our general view that a person who has purchased a residential property and resided at that address will have "ordinarily resided" at that address.
Where an employee has filed a tax return on the basis that an eligible relocation has occurred, and the reimbursement of the moving expenses associated with that relocation have not been included in income on that basis, it is our view that an employee would not be successful in arguing, three years later, that this was temporary accommodation and that a subsequent move, which would otherwise not qualify as an eligible relocation, is in fact a continuation of one eligible relocation. Accordingly, it is our view that the reimbursement of moving expenses in respect of the subsequent relocation to a new home, that is not an eligible relocation, would be included in the computing income from employment of the employee. Furthermore, no amount would be deductible, pursuant to subsection 62(1) of the Act, in computing the employee's income for tax purposes in respect of the subsequent relocation by virtue of the fact that the relocation would not be an "eligible relocation".
We hope that our comments are of assistance.
John Oulton, CA
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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