27 June 1997 External T.I. 9706515 - 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

A Canadian school teacher has accepted a one year exchange position (teaching) in Australia and will continue to be paid by his or her Canadian employer while in that country. The Canadian teacher has agreed to exchange accommodation and will live in the Australian teacher's residence while the Australian teacher will occupy the Canadian teacher's residence. One of the requirements in respect of moving expenses (section 62) is that the Canadian teacher must be a resident of Canada for income tax purposes during his or her period of absence from Canada. A second requirement is that the move must be from the residence from which the individual ordinarily resided to a residence at which after the move, he or she ordinarily resided.The issue is whether these two requirements can be considered to have been satisfied.

Position: Generally, yes

Reasons:

(first requirement) - Pursuant to comments in IT-221R2 (in particular paragraph 2), the Canadian teacher would be regarded as being a continuing resident of Canada.

(second requirement) The Canadian resident would normally be considered to have given up all rights to the use and occupancy of his or her Canadian residence for the duration of the exchange.

970651
XXXXXXXXXX M. Eisner

Attention: XXXXXXXXXX

June 27, 1997

Dear Sirs:

Re: Moving Expenses

This is in reply to your letter of March 10, 1997 concerning the above noted subject. We apologize for the delay in replying.

In your letter, you have indicated that your son has accepted a one year exchange position in Australia as a teacher and that he will continue to be paid by XXXXXXXXXX while he is in Australia. During the exchange period, he has agreed to exchange accommodation and will live in the Australian teacher's residence while the Australian teacher will occupy his residence.

Our Comments

As a result of the confidentiality provisions of the Income Tax Act, we are unable to discuss the details of your son's income situation without his authorization. In addition, it would be necessary to review all the relevant facts and documentation related to his situation. However, we are providing you with the following general comments which, we hope, will be of assistance to you.

General information on moving expenses is set out in Form T1-ME(96) entitled "Claim For Moving Expenses" which has been enclosed for your convenience.

When an individual moves to and from Canada, there are a number of additional requirements which must be satisfied in order to claim moving expenses. One of the requirements is that the individual, during his or her period of absence from Canada, must be a resident of Canada for income tax purposes. An individual is considered to be a resident of Canada if Canada is the place where he or she, in the settled routine of his or her life, regularly, normally or customarily lives. It is always a question of fact whether or not a person is a resident of Canada at a particular time. However, if a Canadian school teacher, with respect to a one year exchange with a teacher from a foreign country, remains in the foreign country for a year, but intends to return to his or her residence in Canada and continue the former teaching duties, it is our view that the Canadian teacher will normally continue to be a resident of Canada for income tax purposes.

A second requirement that must be met in order to claim moving expenses under subsection 62(1) of the Income Tax Act, is that the move must be from the residence from which the individual ordinarily resided to a residence at which after the move, he or she ordinarily resided.

When a Canadian teacher exchanges residences with a foreign counterpart, each party to a one year exchange will normally give up all rights to the use and occupancy of his or her own residence for the duration of the exchange. It is not unusual for each party to remove his or her personal effects from the residence although articles, such as furniture, appliances and kitchen utensils, could be left behind so that the residence continues to be habitable. In these types of circumstances (and assuming that the first requirement is met), it is our view that the Canadian teacher will normally be entitled to claim moving expenses in accordance with the rules set out in section 62 of the Income Tax Act, because that person will have changed the residence at which he or she ordinarily resided on the exchange.

We trust our comments will be of assistance to you but caution that they do not constitute an advance income tax ruling and, accordingly, are not binding on the Department.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch