24 July 2002 External T.I. 2002-0151135 - RELOCATION ASSISTANCE MINE CLOSING

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 as a result of the closing of the town's mine, XXXXXXXXXX , is taxable. The relocation assistance is to be paid by the Province of XXXXXXXXXX and the former employer.

Position: No.

Reasons:

There is no provision in the Income Tax Act to tax the amount paid by the Province, while the amount paid by the former employer would not be taxable by virtue of the position in paragraph 37 of IT-470R.

XXXXXXXXXX 		2002-015113
J. Gibbons, CGA
July 24, 2002

Dear XXXXXXXXXX:

We are replying to your facsimile dated July 8, 2002, concerning the income tax implications of the Province of XXXXXXXXXX's plan to provide residents of XXXXXXXXXX with travel and relocation assistance as a result of the closing of the XXXXXXXXXX Mine, XXXXXXXXXX ("X Co"). We wrote to you on June 12, 2002, expressing the view that such assistance would not be taxable for income tax purposes.

Since that letter was written, X Co has also agreed to provide assistance in the amount of $XXXXXXXXXX for each person in a household who was their employee on XXXXXXXXXX. In our telephone conversations (Gibbons/XXXXXXXXXX), you indicated that there were XXXXXXXXXX residents in XXXXXXXXXX as per the last census taken in XXXXXXXXXX and, since that time, it is estimated that XXXXXXXXXX people have left the community. You also indicated that it is estimated that XXXXXXXXXX% of the residents will eventually move. Also, you confirmed that there are no established communities within approximately XXXXXXXXXX kilometres of XXXXXXXXXX.

Our earlier opinion that the relocation assistance would not be taxable was based on our understanding that the travel and relocation assistance to be paid by XXXXXXXXXX to eligible households would be for personal expenses only, i.e., not in respect of any recipient's employment, business or investment. Obviously that assumption is no longer valid since some XXXXXXXXXX residents may receive amounts by virtue of their employment with X Co, in addition to the amounts received from the Province of XXXXXXXXXX.

In our view, the position set out in paragraph 37 of IT-470R, "Employees' Fringe Benefits (Consolidated)," will apply in the circumstances such that no taxable benefit will be considered to arise under paragraph 6(1)(a) of the Income Tax Act (the "Act") when X Co helps pay the expenses of moving a former employee and his or her family and household effects out of a remote place at the termination of the employment there. However, pursuant to paragraph 62(1)(d) of the Act, recipients will not be entitled to a moving expense deduction for expenses for which they have been reimbursed. In this regard, reimbursements or allowances for moving expenses that are not included in income are deducted from the total moving expenses on line 17 of Form T1-M, "Moving Expense Deduction."

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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