24 February 2010 External T.I. 2009-0341571E5 - 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.

Principal Issues: Whether moving expenses can be carried forward and deducted in years subsequent to the year of the move.

Position: Yes.

Reasons: Effective 1998, moving expenses can be carried forward to future years and deducted against income at the new location subject to the limitations in subsection 62(1).

XXXXXXXXXX 						2009-034157

February 24, 2010

Dear XXXXXXXXXX :

Re: Moving Expenses

We are writing in response to your letter dated September 11, 2009, regarding the timing of the moving expenses deduction. You have asked for our views as to whether moving expenses can be carried forward indefinitely and deducted against income earned in the new location.

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance 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/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following general comments.

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. As noted in your letter, prior to 1998, subsection 62(1) of the Act provided for only a one-year carryforward of moving expenses. Subsection 62(1) of the Act was amended, effective 1998, to remove this restriction. As a result, to the extent that moving expenses paid in respect of an eligible relocation are not deductible in a taxation year because of section 62 of the Act, they may be carried over to subsequent taxation years, subject to the limitations in subsection 62(1) of the Act. In this regard, the reference to a one-year carryforward period in paragraph 3 of Interpretation Bulletin IT-178R3 (Consolidated), Moving Expenses, is outdated. However, we note that the information sheet to Form T1-M, Moving Expenses Deduction, does reflect the CRA's current position on this issue.

You have also asked whether the words "amounts paid" in subsection 62(1) of the Act mean "amounts paid in any taxation year" such that moving expenses paid in a year subsequent to the year of the move may qualify for deduction. While subsection 62(1) of the Act does not set out a timeframe with regard to when costs must be paid, they must have been paid "as or on account of moving expenses incurred in respect of an eligible relocation" and the outlay must have been reasonable in the circumstances. It is a question of fact whether costs associated with a particular move meet these requirements. If, in fact, they are eligible moving expenses for the purposes of section 62 of the Act, they can be carried forward to subsequent taxation years as discussed above.

For more information on what eligible moving expenses a taxpayer is allowed to deduct, including the limitations on the amount of the deduction, please refer to Form T1-M and IT-178R3 (Consolidated).

We trust our comments will be of assistance to you.

Yours truly,

Jenie Leigh
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch