25 August 1993 Internal T.I. 9309737 F - Moving Expenses for an Exchange Teacher

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.

XXXXXXXXXX

Personal and General Section

Attention:  XXXXXXXXXX

Moving Expenses for a Canadian Exchange Teacher

We are replying to your memorandum of April 1, 1993 concerning the issue of what constitutes a move for the purpose of section 62 of the Income Tax Act (the Act). We apologize for the delay in our response.

In the situation under review, a Canadian resident accepted a one year exchange position in Australia as a teacher. The Canadian and Australian teachers continued to be paid by their respective employers in their home country. The Australian teacher lived in the Canadian resident's home while the Canadian resident lived in the Australian's home for the duration of the exchange. In your view, the Canadian resident did not give up her former residence and thus you question whether she has in fact, moved.

The issue can be stated more precisely in that one of the limitations to a claim for moving expenses under subsection 62(1) of the Act is that the move must be "... from the residence ... at which, before the move, he ordinarily resided ... to a residence ... at which, after the move, he ordinarily resided...". It is our view that the phrase "ordinarily resided" has the restricted meaning given to it by the Supreme Court in the case of Thompson v MNR (2 DTC 812) in determining Mr. Thompson's country of residence. Consequently, while an individual may have two or more residences at one time, only one of them will qualify as his or her place of ordinary residence at any particular time and the deduction under section 62 of the Act is limited to those moves in which the individual changes his or her place of ordinary residence.

If as you state, the Canadian resident teacher did not give up her right to occupy her residence in Canada for the duration of the exchange, we agree that she would not be entitled to a claim for moving expenses. However, the example you referred to on page 14 of the 1992 pamphlet "Moving Expenses" contemplates a situation different from that which you describe. Where an individual temporarily moves to another country and leaves dependants behind in the former residence, the individual cannot be said to have changed residences since the former residence is still being maintained for the use of the individual and his or her dependants.

In the situation where a Canadian resident "exchanges" residences with a foreign resident counterpart, one would normally expect each party to the exchange to give up all rights to the use and occupancy of their own residence for the duration of the exchange. One would also expect each party to remove their personal effects from the residence although sufficient furniture would presumably be left behind to make the place habitable. Provided that the exchange is governed by a written agreement rather than an oral one, you should be able to verify the extent to which each party gave up his or her right to use and occupy the residence in the home country.

Even if it is established that the Canadian resident gave up the right to occupy her residence in Canada for the duration of the exchange, the issue still remains as to whether she has changed her place of ordinary residence. Since the exchange program is for one year only, one would expect that the Canadian teacher would be considered a sojourner in Australia, thus remaining a factual resident of Canada. If she is not a factual resident of Canada, section 64.1 of the Act does not apply. Based on the information found in paragraph 20 of the current version of the bulletin on moving expenses (IT-178R3 dated May 28, 1993), one might expect the Canadian resident to be denied the deduction for moving expenses because she is a sojourner in Australia. Assuming that the Australian teacher was deemed to be a resident of Canada throughout the year by reason of paragraph 250(1)(a) of the Act, he or she would not be able to deduct moving expenses because the residence in Canada would not be his or her ordinary place of residence.

However, the Explanatory Notes to Bill C-28 indicate that the legislative intent of section 64.1 of the Act is to extend to Canadian residents who would otherwise be entitled to moving expenses treatment similar to that of students who are studying in a foreign country and receiving income described in paragraphs 56(1)(n) or (o) of the Act and to allow such persons a deduction for reasonable moving expenses notwithstanding the fact they are absent from Canada for some part of the taxation year. In the case of a factual resident of Canada, such an absence would be a period of sojourning or temporary absence from Canada. In our view, it would be inconsistent with the stated purpose of section 64.1 of the Act to deny a claim for moving expenses solely because the Canadian resident is sojourning out of Canada and not ordinarily residing in that other country.

Nevertheless, there may be specific cases where the ties to that other country are not well enough established in order to allow a claim for moving expenses. An example of this is found in the case of Mallett v the Queen (92 DTC 6537), where Ms Mallett was denied a claim for moving expenses from England to Canada on the basis that she did not ordinarily reside in England prior to her return to Canada. It is interesting to note however, that the court accepted the fact that Ms Mallett was ordinarily resident in Paris prior to her return to Canada notwithstanding the temporary nature of her stay in Paris while working for the Department of External Affairs.

In conclusion, while questions similar to those used in determining an individual's country of residence will be useful in determining whether the taxpayer has changed her place of ordinary residence, it is our view that the fact that the Canadian resident is probably considered to be a sojourner by reason of her intention of returning to Canada at the end of the exchange program will not be conclusive in determining whether the moving expenses should be allowed.

P.D. Fuoco Section Chief Personal and General SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.      Client Assistance Directorate

c.c.     Assessment of Returns Directorate