29 April 1998 External T.I. 9804295 - 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:

An individual put a deposit on a house he wished to purchase but subsequently received a job offer in another city and relinquished his deposit to the vendor. Is the deposit deductible as a moving expense?

Position:

No.

Reasons:

Subsection 62(1) provides for the deduction of moving expenses, where, amongst other conditions, a taxpayer who has commenced employment at a location in Canada and for this reason, has moved from the residence in Canada at which he ordinarily resided before the move. In this case, the taxpayer did not “move from the residence in Canada at which he ordinarily resided before the move” because he did not ordinarily reside at the house he was purchasing. In amy event, the $2,000 lost deposit is not an eligible moving expense pursuant to subsection 62(3) (i.e. it is not considered a selling cost in respect of the old residence).

XXXXXXXXXX 980429
G. Moore
April 24, 1998

Dear XXXXXXXXXX:

Re: Moving Expenses

This is in reply to your letter of February 11, 1998, regarding moving expenses.

As we understand the situation described in your letter, you put in an offer on a house in Regina and put a $2,000 deposit on it. Before you could take possession of the house, you received a job offer in another city and had to retract the offer on the house in Regina and relinquish the deposit on the house to the vendor. You have asked whether the deposit on the house is an eligible moving expense.

Our Comments

Section 62 of the Income Tax Act (the “Act”) provides the authority and sets the rules for claims in respect of moving expenses. Subsection 62(1) of the Act provides for the deduction of amounts paid by a taxpayer for moving expenses incurred if certain requirements are met. One of the requirements is that a taxpayer has commenced employment at a work location in Canada and because of this reason has moved from the residence in Canada at which, before the move, he or she ordinarily resided.

The phrase “ordinarily resided” is a term that has been examined by the courts. The courts have determined that a person is ordinarily resident in the place where, in the settled routine of his or her life he or she regularly, normally, or customarily lives. This would be contrasted to a place that is lived in occasionally. In the situation you described, it is our view that the deposit made to purchase the house is not an eligible moving expense because the requirement in subsection 62(1) of the Act that the individual ordinarily reside in the old residence before the move is not met.

As it is not clear from the information provided whether you did, in fact, change residences as a consequence of your new employment, in the event you did move, from another residence in Canada, at which before the move, you ordinarily resided (the “old residence”), the $2,000 lost deposit with respect to the Regina property would not be an eligible “moving expense.” Pursuant to subsection 62(3) of the Act, such amount would not be considered a selling cost in respect of the old residence.

We trust our comments will be of assistance to you.

Yours truly,
J. Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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