29 June 1999 External T.I. 9913795 - MOVING EXPENSE (MORTGAGE PENALTY)

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 mortgage specialist has started a business to assist persons in negotiating the discharge penalty of mortgages when that person is being moved. The fee that is charged is less than the mortgage penalty reduction negotiated. He has requested our opinion as to whether his fees would be considered an eligible moving expense.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

IT 178R3 paragraph 12, clause (e), explains that legal fees and mortgage prepayment or discharge fees that are related to the sale of the old residence are eligible. The fees of a specialist, although not a lawyer or notary, who negotiates a reduction of the mortgage prepayment penalty, would generally qualify under subsection 62(3) as an eligible moving expense when paid in connection with the sale of the old residence.

XXXXXXXXXX 5-991379
D. Miller
Attention: XXXXXXXXXX

June 29, 1999

Dear XXXXXXXXXX:

Re: Eligible Moving Expenses - Section 62

This is in reply to your letter of May 18, 1999, regarding eligible moving expenses pursuant to subsection 62(3) of the Income Tax Act (“the Act”).

We understand that you provide a service to individuals faced with a mortgage discharge penalty. You specialize in negotiating a reduction in the mortgage discharge penalty and if successful you charge a percentage of the reduction. You have enquired if the fee that you charge would be considered an eligible moving expense for purposes of section 62 of the Act.

Our Comments:

Subsection 62(3) of the Act defines eligible moving expenses. Pursuant to paragraph 62(3)(e) of the Act, “moving expenses” include any expenses incurred as or on account of “the taxpayer’s selling costs in respect of the sale of the old residence”. Paragraph 12(e) of IT-178R3, Moving Expenses explains that selling costs include “legal fees, real estate commissions and mortgage prepayment or discharge fees incurred on the sale”.

Provided that the fees charged by you are incurred in respect of “the sale of the old residence”, it is our opinion that such fees would generally be considered to be an eligible moving expense for purposes of section 62 of the Act.

We trust that these comments will be of assistance.

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch