16 March 1999 9905726 - 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 moved from one city to another city where he had obtained an employment position. However, there was a delay of approximately three years between the time he commenced to be employed at the new location and the time he moved. The individual commuted during the three year time period. Can the individual, pursuant to subsection 62(1) of the Income Tax Act, be considered to have moved by reason of the new employment position.

Position:

Yes

Reasons

The issue involves a question of fact. There were a number of factors that resulted in a three year delay in selling the residence. One of the factors was that the individual wanted to ensure that he was capable of handling the job because he had experienced a number of serious health problems including two heart attacks. Other factors that resulted in the delay of the sale of the individual’s residence were a depressed real estate market in circumstances where the individual’s financial position was not good, and a unique problem that made his residence very difficult to sell once the residence was put up for sale. The Beyette case (89 DTC 701), which has been accepted by the Department, is good support for the position.

			March 16, 1999

	Client Services Directorate	HEADQUARTERS
	Correspondence Division	M. Eisner
(613) 957-2138
	Attention:  Richard Gendron
	                Manager
			990572

Moving Expenses - XXXXXXXXXX (“Individual A”)

This is in reply to your memorandum dated March 4, 1999 in which you asked us for our comments on whether Individual A is entitled to deduct moving expenses on his 1997 T-1 income tax return.

In the circumstances of your situation, Individual A, up to XXXXXXXXXX, was the president and a 50% shareholder in XXXXXXXXXX. Individual A was actively involved in the operations of that company. In addition, Individual A owned a 50% interest in a commercial property located at XXXXXXXXXX.

Individual A experienced a number of health problems including

XXXXXXXXXX

While he started his new job in XXXXXXXXXX, Individual A commuted between his home in XXXXXXXXXX and his employer’s location in XXXXXXXXXX for approximately three years for a number of reasons, rather than moving. He wanted to be sure that he, as well as his employer who was aware of his medical problems, were satisfied that he was capable of coping with the new job.

XXXXXXXXXX Individual A also hoped that his new employer would cover the cost of moving once he had demonstrated that he could capably handle the responsibilities of his new employment position; however, his employer did not offer to do so.

Once Individual A felt that he was able to cope with his new job, he continued to commute rather than sell his home and move to XXXXXXXXXX because, at that time, housing prices were depressed and his financial position was not good. However, even though the real estate market continued to be depressed, Individual A put his residence and his interest in the commercial property up for sale in XXXXXXXXXX. The two properties were finally sold in XXXXXXXXXX, at which time, Individual A and his family proceeded to move to XXXXXXXXXX. Individual A has indicated that it was difficult to sell his residence which backed onto hydro towers (a greenbelt area), because reports suggested that the hydro lines might cause cancer.

Taxpayer’s Position

Individual A’s representative has indicated that while a period of approximately three years between the time Individual A commenced his new employment position in XXXXXXXXXX and moved to XXXXXXXXXX is long, the circumstances of Individual A are exceptional and that, accordingly, he should be permitted to claim his moving expenses.

Position of the XXXXXXXXXX Tax Services Office (“TSO”)

The TSO is of the view that Individual A is not entitled to claim moving expenses as the delay in selling the XXXXXXXXXX residence was the result of awaiting better market conditions (i.e., the retention of the residence was viewed as an investment) in which to sell the residence.

Our Comments

Subsection 62(1) of the Income Tax Act (the “Act”) among other things, provides that “Where a taxpayer has, at any time, commenced to carry on a business or to be employed at a location in Canada ... and by reason thereof has moved to a residence in Canada”. As indicated in paragraph 15 of Interpretation Bulletin IT-178R3 “Moving Expenses”, it is a question of fact whether the reason for a move is a new employment position.

In the circumstances under consideration, it is clear that Individual A’s move to XXXXXXXXXX was delayed because:

(a) the state of his health, as Individual A, as well as XXXXXXXXXX, were unsure whether he could cope with the new employment position;

(b) XXXXXXXXXX;

(c) the depressed real estate market conditions as well as the fact that Individual A’s financial condition was not good; and

(d) Individual A’s residence was difficult to sell as it was situated near hydro towers and reports had been issued which indicated that the power lines could cause cancer.

While the factors in (a) to (d) above resulted in a delay in Individual A’s move from XXXXXXXXXX to XXXXXXXXXX, it is our view that they do not result in Individual A having moved from XXXXXXXXXX to XXXXXXXXXX for a reason other than his new employment position; rather, the facts indicate, in our opinion, that he did move to XXXXXXXXXX because of his new position with XXXXXXXXXX. These views seem to be consistent with the decision of the Tax Court of Canada in James D. Beyette v. M.N.R. (89 DTC 701). With respect to this decision, the taxpayer commenced to be employed at a new location in 1981 but did not move until 1986. The taxpayer commuted during that time period. The delay in moving was attributable to health problems, lack of housing near the new work location, and an inactive selling market in the city where the taxpayer lived. The Tax Court of Canada held that the taxpayer was entitled to deduct moving expenses under section 62 of the Act.

In summary, we would suggest that Individual A has provided sufficient explanations to support the “by reason of” test in subsection 62(1) of the Act. On the basis that Individual A otherwise qualifies to deduct eligible moving expenses, we recommend that he should be allowed to claim such expenses.

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

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to

Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.

Jim Wilson
Section Chief
Business, Property & Employment Section II
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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