11 February 1998 Internal T.I. 9727537 - 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:

During July of 1996, an individual commenced an employment position with XXXXXXXXXX and earned $XXXXXXXXXX in that year. Pursuant to subparagraph 110(1)(f)(iii), the individual was entitled to deduct the amount of $XXXXXXXXXX which was reported as employment income. In connection with the XXXXXXXXXX employment, the individual moved from XXXXXXXXXX and claimed moving expenses of $XXXXXXXXXX (the individual earned employment income of $XXXXXXXXXX prior to leaving Canada). The issue is whether the individual is entitled to deduct the moving expenses under section 62 of the Act.

Position:

It depends on whether or not the individual was a non-resident at the time in late 1996 when he moved into the new residence in XXXXXXXXXX.

Reasons:

On the basis that section 64.1 extends the application of section 62 to the individual (i.e., the individual was absent from but resident in Canada), the individual would be entitled to deduct the moving expenses as the deduction is of a general nature as opposed to a deduction from a particular income source. However, if section 64.1 does not extend the application of section 62 because the individual became a non-resident in 1996 when he moved to XXXXXXXXXX (this issue involves a question of fact), the individual would not be allowed to deduct moving expenses.

		February 11, 1998

	International Tax Services Office	HEADQUARTERS
	Jean Prefontaine	M. Eisner
	Collection Contact Officer	(613) 957-2138
		972753

Moving Expenses - XXXXXXXXXX (the Individual)

This is in reply to your memorandum of October 14, 1997 concerning moving expenses claimed in the Individual’s 1996 income tax return. We also acknowledge our telephone conversation (Eisner/Prefontaine) on December 31, 1997 in which we obtained clarification of the circumstances of the situation.

During the 1996 taxation year, the Individual accepted an employment position with XXXXXXXXXX for a six month period commencing in July, 1996. In connection with the position, the Individual moved from XXXXXXXXXX and claimed moving expenses of $XXXXXXXXXX which were allowed when the Individual’s 1996 return was assessed. In his 1996 income tax return, the Individual reported employment income of $XXXXXXXXXX with respect to his employment with XXXXXXXXXX (He also declared T4 employment income of $XXXXXXXXXX that was earned prior to his XXXXXXXXXX employment.). The Individual was also allowed a deduction of $XXXXXXXXXX under subparagraph 110(1)(f)(iii) of the Income Tax Act (the Act), which permits a deduction in respect of employment with a prescribed international organization.

You have asked for our comments on the Individual’s claim for moving expenses.

Our Comments

It is our understanding that the Individual has been allowed a deduction for moving expenses under subsection 62(1) of the Act through the rules in section 64.1 of the Act, which extends the application of section 62 of the Act to certain individuals who are absent from Canada. On the basis that section 64.1 of the Act is applicable to the Individual's situation, i.e. the Individual was absent from but resident in Canada (which is always a factual determination), it is our view that the Individual is entitled to deduct moving expenses that are otherwise allowable under section 62 of the Act in determining his net income.

If, however, section 64.1 of the Act does not apply because the Individual became a non-resident of Canada in 1996, then it is our view that the Individual is not entitled to a deduction under section 62 of the Act for his moving expenses.

Additionally, based on our review of the file you sent to us, we note that some of the expenses claimed by the Individual seem to relate to the purchase of the new residence. You may wish to review those expenses as paragraph 62(3)(f) of the Act limits moving expenses in respect of the acquisition of the new residence to legal fees and certain taxes (see paragraph 12(f) and 13 of Interpretation Bulletin IT-178R3).

Your file is enclosed.

If you require further technical assistance, we would be pleased to provide our views.

John F. Oulton
Section Chief
Business, Property and Employment Section II
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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