1 November 2002 External T.I. 2002-0150105 - MOVING EXPENSES-FACTUAL RESIDENTS

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 the relocation outside Canada for work-related purposes of taxpayers who remain factual residents of Canada can be considered an eligible relocation in light of the requirements in par. (b) of the definition in ss. 248(1) to "ordinarily reside" at the new location outside Canada.

Position: Yes.

Reasons: A taxpayer may have more than one residence for tax purposes. A taxpayer may ordinarily reside in a residence outside Canada without having severed all his or her residential ties with Canada.

XXXXXXXXXX 2002-015010

P. Massicotte, CA, M.Fisc.

November 1, 2002

Dear XXXXXXXXXX:

Re: Moving Expenses of Factual Residents

We are writing in response to your letter of June 28, 2002, wherein you requested our comments in respect of the deductibility of moving expenses under section 62 of the Income Tax Act (the "Act").

You refer to the portion of Form T1-M Moving Expenses Deduction which states that factual residents of Canada may claim moving expenses if they relocate from a place where they ordinarily resided to another place where they ordinarily reside. You ask us to clarify how a taxpayer can be considered to ordinarily reside at a new residence outside Canada for the purposes of the definition of "eligible relocation" in subsection 248(1) of the Act while at the same time remain factually resident in Canada.

Our Comments

Written confirmation of the tax implications arising from proposed transactions is given by this Directorate only where the transactions are the subject matter of an advance income tax ruling request pursuant to Information Circular 70-6R5. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. However, we are prepared to provide you with the following general comments.

Subsection 62(1) of the Act provides that, subject to certain conditions and limits, a taxpayer may deduct moving expenses paid in respect of an eligible relocation. As you know, the term "eligible relocation" is defined in subsection 248(1) of the Act. It provides, in part, that the relocation must occur to enable the taxpayer to be employed at a new work location in Canada, both the residence at which the taxpayer ordinarily resided before the relocation and the residence at which the taxpayer ordinarily resided after the relocation must be in Canada, and the new residence must be at least 40 kilometres closer to the new work location than the old residence was.

However, where the taxpayer is absent from but is resident in Canada, the taxpayer is not subject to the "in Canada" requirements noted above. That is, if the taxpayer is absent from but resident in Canada, the taxpayer's relocation may be an "eligible relocation" even though the new work location is not in Canada, or the old and new residences are not in Canada, provided that the other requirements for claiming the moving expense deduction are met. Subsection 250(3) of the Act provides that a reference to a person resident in Canada includes a person who was ordinarily resident in Canada.

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. This interpretation has also been generally adopted in the context of the moving expense deduction, and the definition of eligible relocation.

As indicated in paragraphs 18 to 20 of Interpretation IT-178R3, a taxpayer is generally considered to have changed residences when the new residence is established as the place at which that individual ordinarily resides as a result of the move of that individual, members of the household and their possessions. Indications of such a move include the selling, renting or advertising for sale or rent of the former residence or cancelling a lease for the former residence. While the determination as to where a person ordinarily resides at a particular time is ultimately a question of fact, it is generally our opinion that where an individual is living in temporary accommodations, such as a hotel, motel or other similar arrangements (with limited living facilities, such that the stay is more casual in nature), he or she would not ordinarily reside at that location for purposes of the definition of "eligible relocation" in subsection 248(1) of the Act.

The determination of an individual's residence status for income tax purposes generally depends on the extent of an individual's residential ties with a particular location, as explained in Interpretation Bulletin IT-221R3 (Consolidated). A person who is considered resident in Canada during a taxation year is subject to Canadian income tax on his or her worldwide income from all sources. The term "resident" is not defined in the Act. While the residence status of an individual can only be determined on a case by case basis after taking into consideration all of the relevant facts, generally, unless an individual severs all significant residential ties with Canada upon leaving Canada, the individual will continue to be a factual resident of Canada. It is generally accepted that a taxpayer may have more than one residence at the same time.

As a result, it may be that a taxpayer ordinarily resides at a new location which is outside Canada for the purposes of the definition of "eligible relocation" in subsection 248(1) of the Act yet retains sufficient residential ties with Canada while living abroad so as to remain a resident of Canada for the purposes of subsection 2(1) of the Act.

We trust the above comments are of assistance to you.

Yours truly,

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

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