22 January 2013 External T.I. 2012-0443211E5 - Moving Expenses - multiple moves

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. Are eligible moving expenses allowed as a deduction under subsection 62(1) of the Act for multiple moves where some of the moves are temporary? 2. Are long term storage costs allowed as a moving expense deduction under subsection 62(1) of the Act?

Position: 1. Question of fact. 2. No.

Reasons: 1. Eligible moving expenses provided for in subsection 62(3) of the Act are allowed as a moving expense deduction under subsection 62(1) of the Act when the individual has an eligible relocation as defined in subsection 248(1) of the Act. An eligible relocation requires, in part, that the individual ordinarily reside at a residence before and after the move. It is a question of fact whether the individual has ordinarily resided at some of the locations in question. 2. Under subsection 62(3) of the Act, deductible moving expenses include any expense incurred as or on account of "the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence." In this case, the long term storage costs are not incurred "in the course of moving" and are therefore not deductible as a moving expense under subsection 62(1) of the Act.

XXXXXXXXXX
2012-044321
P. Waugh

January 22, 2013

Dear XXXXXXXXXX:

Re: Moving Expenses

We are writing in response to your email of April 10, 2012, concerning the deduction of moving expenses. More specifically, you have enquired whether moving expenses incurred for multiple moves and long term storage costs would qualify for the moving expense deduction for income tax purposes in the circumstances described below.

Our Comments

Written confirmation of the tax implications inherent in particular transactions are 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 Ruling, dated May 17, 2002. Where a particular transaction has already been completed, a review of the relevant facts and circumstances surrounding the situation would be required. Such review would normally be conducted by the applicable tax services office during the course of an income tax audit which, if undertaken, would be carried out after the particular taxpayer has prepared and filed its income tax return for the year. Notwithstanding the foregoing, we are prepared to provide the following comments that may be of assistance.

Moving Expense Conditions

Subject to certain conditions and limits, subsection 62(1) of the Income Tax Act (the "Act") allows a taxpayer to deduct, from income, amounts paid by the taxpayer "as or on account of moving expenses incurred in respect of an eligible relocation". Assuming there is an eligible relocation, in order for a particular moving expense to be deductible by a taxpayer, the amount must actually be paid. For instance, if eligible moving expenses are paid by anyone other than the taxpayer, including the taxpayer's employer, such amounts would not be deductible. If an employer pays or reimburses an employee for only part of the moving expenses, the remainder is deductible by the employee to the extent that it constitutes an eligible moving expense.

Moving expenses that are eligible for deduction for the purposes of subsection 62(1) of the Act are defined at subsection 62(3) of the Act and listed in paragraph 12 of Interpretation Bulletin IT-178R3, Moving Expenses Deduction. Eligible moving expenses must be deducted in the year that they are paid; however, the amount claimed cannot be more than the income earned at the new work location. Any excess may be carried forward and deducted in a year subsequent to the year of the move to the extent of income earned at the new work location. Eligible expenses paid in a year following the year of the move cannot be carried back to a previous year.

Eligible relocation

The term "eligible relocation" is defined in subsection 248(1) of the Act to include a relocation that enables a taxpayer to carry on business or be employed at a new work location in Canada. 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 kilometers closer to the new work location than the old residence was. Finally, in order for eligible moving expenses to be considered "as or on account of moving expenses incurred in respect of an eligible relocation", they must fall within the limitations in subsection 62(1) of the Act.

Ordinarily Reside

As stated above, one of the requirements to qualify as an "eligible relocation" (and, therefore, for moving expenses to be deducible) is that the taxpayer must move from a residence at which the taxpayer "ordinarily resided" before the move, to a residence at which the taxpayer "ordinarily resided" after the move.

As explained in paragraph 18 of IT-178R3, a taxpayer is generally considered to have changed residences when the new residence is established as the place at which that individual "ordinarily resides" as a result of the move of that individual, members of the household and their possessions. Further, for purposes of the moving expense deduction, the courts have generally taken the view that a person ordinarily resides in the place where, in the settled routine of his or her life, he or she regularly, normally, or customarily lives.

Although we recognize that a taxpayer need not form the intention to remain at a particular location permanently to be considered to be "ordinarily residing" there, it is our view that the taxpayer must nonetheless settle into the new location and centralize his or her mode of living at that new location. This requires an examination of all the relevant facts of each particular case.

Factors that should be considered in determining whether a taxpayer "ordinarily resides" at a particular new location are:

• whether the taxpayer and members of the taxpayer's household and their possessions have moved to the new location; and
• the availability of the old residence, i.e. whether sold, rented or advertised for sale or rent (if owned) or whether the lease was cancelled (where leased).
• Whether the accommodation selected at the new location is consistent with the taxpayer's ordinary mode of life and needs (e.g. whether the taxpayer can live in the new accommodations for an indefinite period, as opposed to occupying temporary accommodations such as a hotel room, a room at a friend's home or a room in a boarding house);
• Changes to the taxpayer's banking and other financial arrangements (such as insurance policies, etc.) from the old to the new location;
• Changes to the taxpayer's driver's license and vehicle registrations (to meet requirements of the new location or to show the new address of residence);
• Changes to health care coverage to the new location;
• Changes in mailing address from the old to the new location;
• Changes in conveniences from the old to the new location (such as newspaper, magazine or other subscriptions, cable, internet, wireless phone, etc.); and
• Changes to social relations and other interests from the old location to the new location (such as participation in recreational, social, political and/or religious activities, membership in personal or professional organizations, etc.).

Multiple Moves

Where a taxpayer makes multiple moves, each move will generally be treated as a separate move and each move will need to qualify as an eligible relocation and meet the conditions in subsection 62(1) of the Act in order for eligible moving expenses to be allowed as a deduction. Where it is determined that a taxpayer does not ordinarily reside at a new residence, the move to that residence would be considered temporary and would not be treated as a separate move.

For example, consider a situation where a taxpayer moves from House A to House B for new employment and remains in House B for 11 months before moving to House C. The taxpayer remains with the same employment during the move from House B to House C.

Where it is determined that the taxpayer ordinarily resided at House A, House B and House C, each move would be considered a separate move (one move to House B and a separate move to House C). If the move to House B qualifies as an eligible relocation, eligible moving expenses associated with the move to House B would be deductible as a moving expense as long as all conditions of subsection 62(1) of the Act are met. In this situation, eligible moving expenses associated with the move to House C would not be allowed as a moving expense deduction since the move to House C is not an eligible relocation as the move would not have occurred to enable the individual to be employed at a new work location in Canada.

Where it is determined that the taxpayer did not ordinarily reside at House B, the taxpayer's move would be from House A to House C and eligible moving expenses associated with the move from House A to House C would be deductible, assuming all conditions of subsection 62(1) of the Act are met. For purposes of determining the eligible moving expenses, the move to House B would be considered temporary and paragraph 62(3)(c) of the Act would restrict the cost for meals and lodging near House B to be limited to a period not exceeding 15 days.

Long Term Storage

As noted above, only moving expenses listed in subsection 62(3) of the Act may qualify for a moving expense deduction. Subsection 62(3) specifically provides that moving expenses in subsection 62(1) include any expense incurred as or on account of "the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence." As the costs incurred by you relate to the long term storage of your household goods and were not incurred "in the course of moving" from your "old residence" to your "new residence", they will not be an eligible expense for purposes of the moving expense deduction under section 62 of the Act.

We trust these comments will be of assistance.

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