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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether travel and relocation assistance to be paid to residents of a small mining community by the XXXXXXXXXX government as a result of the closing of the town's mine, XXXXXXXXXX , is taxable.
Position: No.
Reasons: The travel and relocation assistance to be paid by XXXXXXXXXX to eligible households is for personal expenses only, i.e., not in respect of any recipient's employment, business or investment. There is no provision in the Income Tax Act which taxes such payments.
XXXXXXXXXX 2002-013801
J. Gibbons, CGA
June 12, 2002
Dear XXXXXXXXXX:
We are replying to your facsimile dated May 1, 2002, concerning the income tax implications of the Province of XXXXXXXXXX plan to provide residents of XXXXXXXXXX with travel and relocation assistance as a result of the closing of the XXXXXXXXXX Mine, XXXXXXXXXX. It is anticipated that XXXXXXXXXX% of the residents of XXXXXXXXXX will relocate out of the community.
Our comments are of a general nature only, since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular IC 70-6R5.
Facts
? The Province of XXXXXXXXXX has allocated $XXXXXXXXXX for travel and relocation assistance for residents of XXXXXXXXXX (or up to $XXXXXXXXXX per household).
? All of the funds for the travel and relocation assistance will come from XXXXXXXXXX.
? XXXXXXXXXX has targeted the end of XXXXXXXXXX to have its travel and relocation assistance up and running.
? In order to be eligible for travel and relocation assistance, households must either be:
? Current residents of XXXXXXXXXX, or
? Residents of XXXXXXXXXX.
? Any household that receives complete relocation compensation from a new employer will not be eligible for relocation assistance from XXXXXXXXXX.
? Travel assistance is provided for job-searching and house-hunting in a locality outside of XXXXXXXXXX.
? An eligible household will qualify for a maximum entitlement of $XXXXXXXXXX.
? Eligible travel expenses will be in respect of:
i) up to XXXXXXXXXX kilometres of distance travelled (based on a two-way trip to XXXXXXXXXX);
ii) up to XXXXXXXXXX nights accommodation; and
iii) up to XXXXXXXXXX days of meals.
? For travel after XXXXXXXXXX:
i) Eligible households will be required to apply in advance for travel assistance.
ii) Eligible households will receive XXXXXXXXXX% of their travel entitlement up-front, and the remaining XXXXXXXXXX% after they submit the proper documentation.
? For travel prior to XXXXXXXXXX:
i) Eligible households can apply for retroactive assistance for travel expenses incurred before this date.
ii) Application forms will be mailed to households that have already relocated from XXXXXXXXXX.
iii) Eligible households will receive XXXXXXXXXX% of their travel entitlement after they submit proper documentation.
? Proof of travel may include travel tickets, gas receipts, hotel receipts, food receipts, etc.
? Relocation assistance is provided for relocation to a new locality outside of XXXXXXXXXX where employment is found, access to job opportunities is greater, or retirement is desirable.
? An eligible household will qualify for a maximum entitlement of $XXXXXXXXXX.
? For relocations after XXXXXXXXXX:
i) Eligible households will be required to apply in advance for relocation assistance.
ii) Eligible households will receive XXXXXXXXXX% of their relocation entitlement up-front, and the remaining XXXXXXXXXX% after they submit the proper documentation.
? For relocations prior to XXXXXXXXXX:
i) Eligible households can apply for retroactive assistance for relocation expenses incurred before this date.
ii) Application forms will be mailed to households that have already relocated from XXXXXXXXXX.
iii) Eligible households will receive XXXXXXXXXX% of their relocation entitlement after they submit proper documentation.
? Proof of relocation may include proof of new address, proof of new employment, etc.
? An eligible household may transfer any unused portion of its travel entitlement to its relocation entitlement. For example, a household that uses only $XXXXXXXXXX of its $XXXXXXXXXX travel entitlement may transfer the remaining $XXXXXXXXXX to its relocation entitlement so that it increases from $XXXXXXXXXX to $XXXXXXXXXX.
Based on our understanding that the travel and relocation assistance to be paid by XXXXXXXXXX to eligible households is for personal expenses only, i.e., not in respect of any recipient's employment, business or investment, it is our view that such assistance will not be taxable for income tax purposes. However, the recipients will not be entitled to a moving expense deduction pursuant to paragraph 62(1)(d) of the Income Tax Act.
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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