22 January 2003 External T.I. 2002-0173595 - moving expenses

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: An individual moved (apparently a distance which is in excess of 40 kilometres) in order to enhance his employment opportunities with his current employer. However, the individual has been unsuccessful in obtaining a position at the new location. The employee has asked about the deductibility of the moving expenses.

Position: General comments were provided. We noted that subsection 62(1) of the Act allows for the amount paid as or on account of eligible moving expenses that were not deductible in the year they were paid, to be deducted in a future year to the extent not previously deductible. However, it is a question of fact whether or not the individual moved for the purpose of enabling himself to be employed at a new work location in Canada (paragraph 15 of IT-178R3).

Reasons: It was not possible to provide definitive comments because of the limited information that was considered.

XXXXXXXXXX 2002-017359
M. Eisner, CA
January 22, 2003

Dear XXXXXXXXXX:

Re: Moving Expenses

This is in reply to your letter of November 2, 2002 concerning the above-noted subject.

You are an employee of the XXXXXXXXXX (the "Bank") and have indicated that in order to enhance your opportunities for a job posting in XXXXXXXXXX with the Bank, you moved from XXXXXXXXXX to XXXXXXXXXX which are more than 40 kilometres apart. However, up to the present time, you have been unsuccessful in obtaining a new employment position. You indicate the move has been made at your expense and that you are not entitled to receive any form of assistance in respect of these expenses. While you have indicated that your move to XXXXXXXXXX was employment-related, you are concerned whether you are entitled to deduct your moving expenses, as you are not employed at the new location.

You have asked us for our comments on this matter.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request pursuant to Information Circular 70-6R5. Where the particular transactions are completed, the enquiry should be sent to your local Tax Services Office. However, we are prepared to provide the following general comments.

General information on moving expense claims is set out in Form T1-M and Interpretation Bulletin IT-178R3. It is our understanding that you have a copy of these documents.

One of the requirements to claim moving expenses under subsection 62(1) of the Income Tax Act (the "Act") is that the amounts be paid as or on account of eligible moving expenses incurred in respect of an "eligible relocation", which is defined in subsection 248(1) of the Act. Part of the definition of "eligible relocation" refers to a relocation that occurs to enable the taxpayer to be employed at a new work location in Canada (the move must also result in the taxpayer living at least 40 kilometres closer to the new work location). In relation to these comments on an employment-related move, paragraph 15 of IT-178R3 indicates that eligible moving expenses are deductible only when the reason for the residential move is to begin employment at the new location. It is always a question of fact whether or not a move has been made for such a reason; accordingly, we are not in a position to comment on whether this requirement has been met.

When a relocation occurs for the purpose of enabling an individual to be employed at a new work location in Canada and the other requirements of the definition of "eligible relocation" are met, the amount that may be deducted for moving expenses is subject to certain limits. One of the limits is that the amount deductible in respect of eligible moving expenses for any particular year may not exceed the taxpayer's employment income at the new work location for that year. Accordingly, as in your situation, where no employment income is earned at the new work location for a particular year, no deduction can be claimed for that year in respect of moving expenses. However, subsection 62(1) of the Act allows for the amount paid in respect of such expenses that were not deductible because of this limit to be carried forward and deducted in a future year when employment income is earned at the new work location (to the extent they were not previously deductible). We note that these comments are consistent with Form T1-M "Moving Expenses Information" under the heading "Are you employed or self-employed?".

We trust that our comments are of assistance to you.

Yours truly,

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

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