5 May 2004 External T.I. 2004-0063051E5 - Moving Exp. - mortgage default ins.

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.

Principal Issues: Whether CMHC mortgage default insurance is an eligible moving expense?

Position: No.

Reasons: Subsection 62(3) provides that for greater certainty, moving expenses do not include costs (other than costs referred to in paragraph (f)) incurred by the taxpayer in respect of the acquisition of the new residence. Paragraph 62(3)(f) allows the deduction of legal fees in respect of the purchase of the new residence, and any tax, fee or duty (excluding GST or value added tax) imposed on the transfer or registration of title to the new residence.

2004-006305
XXXXXXXXXX Karen Power, CA
(613) 957-8953
May 5, 2004

Dear XXXXXXXXXX:

Re: Moving Expenses

We are writing in reply to your letter of November 25, 2003, addressed to the Summerside Tax Centre, which was forwarded to the Income Tax Rulings Directorate for reply. You ask whether Canada Mortgage and Housing Corporation mortgage default insurance is an allowable moving expense in respect of an employment related move. We apologize for the delay in responding.

Our comments

Subsection 62(1) of the Income Tax Act (the "Act") provides that, subject to certain conditions and limits, a taxpayer may deduct moving expenses paid in respect of an eligible relocation. 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.

Under subsection 62(3), eligible moving expenses include any expense incurred as, or on account of,

(a) travelling costs, including meals, lodging and vehicle expenses, in the course of moving the taxpayer and members of the household;

(b) transportation and storage costs for household effects;

(c) costs for up to 15 days of meals and temporary accommodation for the taxpayer and members of the household, near either residence;

(d) costs of cancelling a lease for the old residence;

(e) the taxpayer's selling costs for the sale of the old residence;

(f) where the old residence is sold by the taxpayer or spouse or common-law partner as a result of the move, the cost to the taxpayer of legal fees in respect of the purchase of the new residence, and any tax, fee or duty (other than GST/HST or value-added tax) imposed on the transfer or registration of title to the new residence;

(g) interest, property taxes, insurance premiums and heating and utility costs, to a maximum of $5,000, for the old residence during the period that reasonable efforts are being made to sell it, and it is neither rented out nor occupied by the taxpayer or a member of the taxpayer's household; and

(h) costs of revising legal documents to reflect the address of the taxpayer's new residence, replacing drivers' licences and non-commercial vehicle permits, and utility connections and disconnections.

Subsection 62(3) of the Act also specifically states that for greater certainty, moving expenses do not include costs (other than costs referred to in paragraph (f)) incurred by the taxpayer in respect of the acquisition of the new residence. In our view, mortgage default insurance would not be considered a tax, fee or duty imposed on the transfer or registration of title to the new residence, and therefore would not be considered an eligible moving expense.

We trust our comments will be of assistance to you.

Yours truly,

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