6 November 2012 External T.I. 2012-0446601E5 - 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 the taxpayer's move from City A to City B while still employed at City A and subsequent employment from his/her home in City B, is an "eligible relocation" for purposes of claiming moving expenses.

Position: Likely not.

Reasons: To be an eligible relocation, the move must have enabled the taxpayer to be employed at or in the new location. It is questionable whether the move enabled the taxpayer to be employed at his/her home.

XXXXXXXXXX 2012-044660
N. Pulandiran

November 6, 2012

Dear XXXXXXXXXX:

Re: Eligible Relocation

We are writing in response to your email of April 30, 2012, concerning the deductibility of moving expenses incurred when you moved from City A to City B in the same province. We understand that, at the time of the move, you were employed in City A, but you knew that you would be laid off in XXXXXXXXXX months. We further understand that City B was chosen as it would cut down the commuting time of your spouse and you had hoped to find employment in City B. XXXXXXXXXX months after the move, you found employment with a new employer in City C; however you principally work from your residence in City B. We also understand that the distance from your old residence in City A to your new residence in City B is more than 40 kilometres greater than the distance between your new residence in City B and your new work location, assuming your new residence qualifies as your new work location.

Under subsection 62(1) of the Income Tax Act, subject to certain conditions and limits, a taxpayer may deduct moving expenses incurred in respect of an “eligible relocation”. The term “eligible relocation” is defined in subsection 248(1) of the Act to mean a relocation that occurs to enable the taxpayer to carry on a business or to be employed at a location in Canada (new work location), and the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location.

It is a question of fact whether your circumstances meet the requirements of the definition of an “eligible relocation”. Although it appears from your email that there is a “new work location”, which is your home office, the mere existence of a new work location is not sufficient to make your move an “eligible relocation”. In particular, we interpret the requirement that “the relocation occurs to enable taxpayer...to be employed at a location in Canada” to mean that the reason for the taxpayer’s relocation must be to be employed at the new work location. In this case, it is unclear why you had to move such a distance to work out of your home. Based on the facts provided, it does not appear that the move occurred to enable you to be employed at a new work location (i.e. your new residence), such that the moving expenses would not be deductible.

We trust our comments will be of assistance to you.

Yours truly,

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