2 November 2012 External T.I. 2012-0440241E5 - moving expenses - expanded territory

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: Does an expanded territory qualify as a new work location for purposes of the definition of eligible relocation?

Position: Question of fact. In this case yes.

Reasons: The significant expansion in size of the sales territory required the taxpayer to move to carry out the additional responsibilities on a permanent basis such that there was a new work location for purposes of the definition.

XXXXXXXXXX
2012-044024
P. Waugh

November 2, 2012

Dear XXXXXXXXXX:

Re: Moving Expenses

We are writing in response to your email of March 16, 2012 concerning the deduction of moving expenses. More specifically, you have enquired whether moving expenses incurred to relocate closer to an expanded sales territory would qualify for the moving expense deduction for income tax purposes in the circumstances described below.

In the situation you described, an individual is a sales manager with a designated sales territory. In XXXXXXXXXX, the sales territory was expanded to include several new territories and new employees.

As a result of the expanded sales territory, the individual decided to relocate to a more central residence to make travelling to the territories he or she supports more accessible with less time travelling from work to home. The move results in the new residence being well over 40 kilometres closer to the majority of the individual's sales territories than the old residence.

Our Comments

Subject to certain conditions and limits, subsection 62(1) of the Income Tax Act (the "Act") provides a deduction in computing an individual's income for a taxation year for amounts paid by the individual as or on account of moving expenses incurred in respect of an "eligible relocation". The term "eligible relocation" is defined in subsection 248(1) of the Act and includes a relocation that occurs to enable the individual to carry on a business or to be employed at a new work location, where the new residence is located at least 40 kilometres closer to the new work location than the old residence. It is always a question of fact whether or not a move has been made for such reasons.

From the information you have provided, in our view the expansion of the sales territory results in a new work location for purposes of the moving expense deduction. In our view, there is a sufficient nexus between the move and the commencement of employment at the new work location to conclude that the relocation occurred to enable the individual to carry on employment and as such should qualify as an eligible relocation. Therefore, as long as all other conditions of subsection 62(1) of the Act are met, the individual would be allowed to claim a moving expense deduction associated with the move.

We trust these comments will be of assistance.

Nerill Thomas-Wilkinson, CA
Manager
for Director
Business and Employment Income Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch