29 November 1999 External T.I. 9922975 - RELOCATION EXP.-DEATH OF EMPLOYEE

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: Treatment of reimbursement of moving expenses.

Position:. Likely not a taxable benefit, question of fact.

Reasons: The employee was transferred from one establishment of the employer to another and commenced work at the new work location, as a result the reimbursement of expenses incurred in moving the employee's family should not be considered as conferring a taxable benefit..

XXXXXXXXXX 				5-992297
					Karen Power, CA
Attention:  XXXXXXXXXX 

November 29, 1999

Dear XXXXXXXXXX:

We are writing in response to your letter dated August 19, 1999 requesting our comments on whether compensation on relocation will result in taxable benefits to an employee in the situation described below.

Our understanding of the facts is as follows:

1. An employee, Mr. A has been transferred from XXXXXXXXXX ("location A") to XXXXXXXXXX ("location B"), and commenced employment at location B after September 30, 1998.

2. Under the collective agreement with the union, employees are entitled to relocation benefits when transferred from one work location to another work location of the employer. The relocation benefits include the payment or reimbursement of legal fees, real estate commission, the cost of shipping and packing household goods, and a non-accountable allowance for miscellaneous out-of-pocket expenses.

3. Mr. A had initiated the relocation process by entering into a "Purchase Guarantee" with his employer with respect to his old residence at location A. The Purchase Guarantee price is the established current market value of the old residence based on an average of two appraisals. If the employee is unable to sell the old residence within 90 days, the company will purchase the residence from the employee at the Purchase Guarantee price.

4. Before Mr. A completed the relocation process, that is, before he purchased a house closer to location B, Mr. A unfortunately died while on the job.

5. Because Mr. A had physically started work at location B and he had initiated the relocation process, Mr. A's spouse is allowed to complete the relocation process and will be entitled to the relocation benefits in compliance with the terms of the collective agreement.

6. Mr. A's spouse has decided to purchase a new home in location A instead of moving closer to location B. The company will pay or reimburse her for the costs incurred as described above.

Our Comments

The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R3, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district taxation office for their views. However, we are prepared to offer the following general comments which may be of some assistance to you.

As explained in paragraph 35 of Interpretation Bulletin IT-470R (Consolidated), where an employer reimburses an employee for the expenses incurred by the latter in moving the employee and the employee's family and household effects either because the employee has been transferred from one establishment of the employer to another or because of having accepted employment at a place other than where the former home was located, this reimbursement is not considered as conferring a taxable benefit on the employee. A detailed list of which items are not considered a taxable benefit can be found in the Employer's Guide to Payroll Deductions - Taxable Benefits T4130.

In the above situation, since Mr. A was transferred from one establishment of the employer to another, and he did in fact commence work at location B, in our view, the reimbursement to Mrs. A of legal fees, real estate commissions on the sale of the old residence, and the cost of shipping and packing household goods will generally not be considered taxable benefits if they are reasonable in the circumstances.

We consider a non-accountable allowance for incidental relocation or moving expenses of up to $650 to be a reimbursement of expenses that an employee incurs because of the move. This allowance would be non-taxable. To be considered a reimbursement for incidental expenses, the employee has to certify in writing that they incurred expenses for at least the amount of the allowance. Non-accountable allowances in excess of this amount would be taxable and the collective agreement would need to be reviewed to resolve how, with the death of Mr. A, it should be reported.

We trust that our comments will be of assistance.

Yours truly,

R. Albert, C.A.

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

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