11 September 2006 External T.I. 2006-0176061E5 - Meaning of Eligible Relocation

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 a move meets the definition of eligible relocation when there is no change in work location?

Position: No.

Reasons: The definition of eligible relocation requires that there be a new work location.

XXXXXXXXXX 								2006-017606

September 11, 2006

Dear XXXXXXXXXX:

Re: Moving Expenses - Meaning of "Eligible Relocation"

This is in reply to your facsimile dated March 14, 2006, requesting our views on the above-noted issue.

You inquired whether amounts expended by a taxpayer to move from Mississauga to Cambridge, Ontario qualify for a deduction as moving expenses. You indicated that the taxpayer works in Waterloo, Ontario and in 2006 moved from Mississauga to Cambridge, Ontario. The new home is greater than 40 kilometres closer to the work location than the previous home but the taxpayer did not change employers or work locations.

Our Comments

For a taxpayer to be entitled to claim moving expenses under subsection 62(1) of the Income Tax Act (the "Act"), one of the requirements that must be met is that the move is an "eligible relocation" as defined in subsection 248(1). For individuals who are employed, it is our view that the definition of eligible relocation specifically requires that the relocation occur to enable the individual to be employed at a new work location in Canada. In the situation you described the move did not occur to enable the taxpayer to be employed at a new work location and therefore, it is our view that moving expenses cannot be deducted under section 62 of the Act.

The above interpretation has been confirmed by the courts. See, for example, the Tax Court of Canada ("TCC") decision in Broydell v The Queen (2005 TCC 79), wherein the court stated:

The conditions of the applicable sections 62 and 248 of the Act, in particular paragraph 248(a) include the condition that the relocation must occur to enable the taxpayer to be employed at a new work location in Canada.

Also, we would note that the fact that the distance between the new residence and the old residence is greater that 40 kilometres is not relevant unless there is also a new work location. See, for example, the TCC decision in Howlett v Canada (1998 DTC 3468), wherein the court stated the following at paragraph 10 of the decision:

In the present appeal, the Appellant met two conditions: the old residence and the new residence. As to the work location it did not change. The Appellant's working pattern changed due to his new position as sales manager. His change of residence was only for the purpose of being closer to the branch office situated at the same location as before moving from one residence to the other.

We trust this information is helpful.

Yours truly,

Randy Hewlett
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch