22 February 2012 External T.I. 2011-0421901E5 - Moving Expenses - Students

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.

Principal Issues: 1. What section of the Act restricts moving expenses to only be deductible against income from scholarships, fellowships, bursaries, etc. when a student moves to attend a post secondary institution? 2. Can moving expenses be deducted against employment income at a new work location where the student moves to attend a post secondary institution?

Position: 1. 62(1)(c)(ii) 2. Question of fact.

Reasons: 1. When an individual moves to attend a post-secondary educational institution on a full-time basis, subparagraph 62(1)(c)(ii) restricts a student's qualified moving expenses to only be claimed against income earned from scholarships, bursaries, research grants, etc. 2. Where the facts demonstrate that a dual-purpose relocation occurred (an individual moved to attend full time studies at a post-secondary institution and to gain employment), the individual would be permitted to deduct moving expenses from both sources of income (employment income earned at the new location and scholarship/bursary income.)

XXXXXXXXXX 							2011-042190
								P. Waugh
February 22, 2012

Dear XXXXXXXXXX :

Re: Moving Expenses

We are writing in response to your letter of September 5, 2011, concerning the deductibility of moving expenses. More specifically, you have asked for clarification on the deductibility of qualified moving expenses against employment income for students.

In the situation you described, an individual moved to study full time at a post-secondary institution. The individual also obtained part-time employment at the new location. You have asked for clarification as to why these moving expenses cannot be deducted against employment income earned at the new location.

Our Comments

In accordance with subsection 62(1) of the Income Tax Act (the "Act"), a taxpayer who moves from one residence to another residence can deduct qualifying moving expenses from specific sources of income if the move is an "eligible relocation". Subsection 248(1) of the Act defines an "eligible relocation" as follows:

248(1) "eligible relocation"
means a relocation of a taxpayer where

(a) the relocation occurs to enable the taxpayer

(i) to carry on a business or to be employed at a location in Canada (in section 62 and this subsection referred to as "the new work location"), or

(ii) to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (in section 62 and in this subsection referred to as "the new work location"), (emphasis added)

(b) both the residence at which the taxpayer ordinarily resided before the relocation (in section 62 and this subsection referred to as "the old residence") and the residence at which the taxpayer ordinarily resided after the relocation (in section 62 and this subsection referred to as "the new residence") are in Canada, and

(c) the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location

except that, in applying subsections 6(19) to (23) and section 62 in respect of a relocation of a taxpayer who is absent from but resident in Canada, this definition shall be read without reference to the words "in Canada" in subparagraph (a)(i), and without reference to paragraph (b);"

When an individual moves to study as a full-time student in a program at a post-secondary level at a university, college or other educational institution, the qualifying moving expenses can only be deducted from income earned from scholarships, fellowships, bursaries, research grant income, certain prizes, etc., that an individual reports as income for the year. The authority for this is found in subparagraph 62(1)(c)(ii) of the Act which states that:

"There may be deducted in computing a taxpayer's income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation, to the extent that
. . .
(c) the total of those amounts does not exceed
. . .
(ii) in any case described in subparagraph (a)(ii) of the definition "eligible relocation" in subsection 248(1), the total of amounts included in computing the taxpayer's income for the year because of paragraphs 56(1)(n) and (o); and (emphasis added)

Similarly, when an individual moves to gain employment, subparagraph 62(1)(c)(i) of the Act only allows the qualifying moving expenses to be deducted from employment income earned at the new location.

The purpose of the move is a key factor in establishing the appropriate tax treatment of the moving expenses under section 62 of the Act. Where the facts demonstrate that a dual-purpose relocation occurred (e.g., the reason for the move was for full-time attendance at a post-secondary educational institution and to gain employment), an individual would be permitted to deduct moving expenses from employment income earned at the new location and against income from scholarships, bursaries, etc. However, the same moving expense cannot be deducted against each source of income.

We trust these comments will be of assistance.

Nerill Thomas-Wilkinson, CA
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch