5 August 2009 External T.I. 2009-0308461E5 - Moving Expenses - Meaning of "new work location"

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:

1. What is the meaning of the term "new work location" for purposes of the moving expense deduction?

2. Can eligible moving expenses be deducted against the income of more than one employment at a "new work location" for purposes of subparagraph 62(1)(c)(i) of the Act?

Position:

1. Question of fact - depends on the context in which it is being applied.

2. Question of fact, but possibly yes.

Reasons:

1. Where a measure is required, the term must be restrictive, for example, in the case of a taxpayer moving from one neighbourhood to another. In this case, "new work location" would refer to the specific place of employment. In other circumstances, it may have a wide connotation, such as where a taxpayer relocates from one city to another. In this case, the "new work location" may refer to the city, in general.

2. Where a measure is not required, a taxpayer who relocates from one city to another may be entitled to deduct his or her eligible relocation expenses against employment income earned from more than one place of employment in the city (i.e., the "new work location").

								2009 - 030846
XXXXXXXXXX 							Renee Sigouin
(613) 957-2128
August 5, 2009

Dear XXXXXXXXXX :

Re: Moving Expenses - Meaning of "New Work Location"

We are writing in response to your email correspondence dated January 30, 2009 wherein you requested our comments regarding the meaning of the term "new work location" as used in subsections 62(1) and 248(1) of the Income Tax Act (Canada) (the "Act") for purposes of the moving expense deduction and the definition of "eligible relocation", respectively. We apologize for the delay in responding to your request.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

In general terms, subsection 62(1) of the Act provides a deduction for eligible moving expenses paid by a taxpayer in respect of an "eligible relocation". Although we will limit our discussion to the employment context, the term "eligible relocation" is defined in subsection 248(1) of the Act to include a relocation that enables a taxpayer to be employed or carry on business at a new work location in Canada or to enrol as a full-time post-secondary student. Both the residence at which the taxpayer ordinarily resided before the relocation ("old residence") and the residence at which the taxpayer ordinarily resided after the relocation ("new residence") 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.

Given that a taxpayer's deduction in a particular year for eligible moving expenses cannot exceed his or her income for the year from employment at the new work location, you have asked whether the phrase "new work location" refers broadly to a municipal area, or alternatively, is limited to a specific office building or work site to which the taxpayer reports.

The term "new work location" is not defined in the Act; however, it has been examined by the courts. In Dalisay v. The Queen, 2004 T.C.C. 126 ("Dalisay"), heard under informal procedure at the Tax Court of Canada ("TCC"), Justice Rip interpreted the term "new work location" and in particular, the deductibility of eligible moving expenses from different employments, at paragraphs 17 to 19, as follows:

"[17] The phrase "the new work location " is not to be interpreted with any rigidity. The words "to carry on a business or to be employed at a location in Canada" have a very broad meaning. The words allow for flexibility in interpretation depending on the facts. For example, if the term " new work location " in the context of the facts at bar refers to an actual business location only, then the taxpayer who moves to enable herself to carry on a business or to be employed at a location in Canada must remain employed at that actual business location until such time as her employment income earned at that site equals her moving expenses. Otherwise she will not have sufficient income to deduct the whole of her moving expenses. For example, if her employer becomes bankrupt or if she is fired from her job or she is forced to resign from her job or changes employment or starts a business and subsequently works at a different work site in this city, town or village, then, if the Crown is correct, she would not be permitted to deduct moving expenses from the income earned from her new employment or business. She would be bound to her original employer until her income earned from this employer equalled her moving expenses.

[18] This could not have been the intent of Parliament. If a person moves from St. John's to Edmonton and immediately is employed by employer "A", it is not the purpose of tax legislation to force that person to remain in A's service of employment in order to get a tax deduction. So long as the person continues to work in Edmonton as an employee or in her business, moving expenses to get to Edmonton to work should be deductible from income earned from that employment or business.

[19] The words "work location" and the phrase "the new work location" are elastic, depending on the context in which they are applied... When a person moves her employment from one city to another, the cities refer to different work locations and when one moves her employment from neighbourhood to neighbourhood, the neighbourhoods describe the different work locations."

Justice Rip noted that where a measurement of distance is required, the phrase must be restrictive; however in other contexts its connotation may be broader.

As already mentioned, a taxpayer's deduction in a taxation year, for moving expenses paid in respect of an eligible relocation undertaken for employment purposes, is limited to his or her employment income for the year at the new work location. However, it is our view that subparagraph 62(1)(c)(i) of the Act allows for the amount paid in respect of eligible moving expenses that were not deductible because of this limit to be carried forward and deducted in any future year when employment income is earned at the new work location. These amounts must be deducted as soon as they are deductible such that a taxpayer does not have the option of claiming the deduction in the year he or she elects (i.e., only the moving expenses which exceed the limit for a particular year may be carried forward).

This view is supported by a TCC case called Moodie v. The Queen, 2004 TCC 462. The case concerned a taxpayer who incurred moving expenses in respect of an eligible relocation from Montreal to Guelph to start a new business in 1997. The taxpayer's new business was unsuccessful and the taxpayer had no employment or business income in Guelph in the 1997 and 1998 taxation years from which to deduct her eligible moving expenses. The TCC concluded that not only could eligible moving expenses be deducted in any future year but also against any employment or business income earned at the new work location under subparagraph 62(1)(c)(i) of the Act in those future years. Justice Morgan referred to the TCC's earlier decision in Dalisay and allowed as a deduction the moving expenses incurred in 1997 against the taxpayer's temporary casual employment income earned in the 1999 taxation year.

Finally, we note that in paragraph 3 of Interpretation Bulletin IT-178R3, "Moving Expenses", we indicate that income earned at the new work location may include income from more than one employment at the new location. This comment, as well as the factors discussed above, supports our view that the specificity necessitated by the term "new work location" depends on the context in which it is being applied. That is, where a distance measurement is required, the term must be restrictive such that the "new work location" would refer to the specific place to which a taxpayer reports to work. However, where a person moves from one city to another, the phrase "new work location" would refer to that city such that the taxpayer's eligible moving expenses could be deducted against the income of more than one employment in that city (subject to the other legislative limitations mentioned above).

We trust that these comments will be of assistance.

Yours truly,

Renée Shields
A/ Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch