13 December 2010 External T.I. 2010-0379001E5 - Taxable benefits - Relocation 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.

Principal Issues: Whether the payment of CMHC fees by an employer on an eligible relocation results in a taxable benefit to the employee.

Position: Yes.

Reasons: An amount paid by any person because of an individual's employment in respect of the cost of, the financing of, or the use of a residence is an employment benefit.

XXXXXXXXXX
									2010-037900
									Rita Ferguson
									519-645-5261
December 13, 2010

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Taxable benefits - Relocation Expenses

This is in response to your facsimile received on August 25, 2010 inquiring about the tax consequences of receiving reimbursement from your employer for part of the Canada Mortgage and Housing Corporation ("CMHC") fees payable on a new residence acquired as the result of relocation at the request of your employer. Your employer paid the difference between the CMHC fees originally paid on the purchase of your old residence in XXXXXXXXXX and the fees paid on your new residence in XXXXXXXXXX .

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subject to various specific exceptions in the legislation, subsection 6(1) of the Income Tax Act (the "Act") provides that taxpayers are generally taxable on the value of all benefits they receive by virtue of their employment. However, a further administrative exception to this general rule is described in paragraph 35 of IT-470R, "(Consolidated) Employees' Fringe Benefits" which provides that no taxable benefit is conferred where an employer reimburses an employee for the expenses incurred in moving the employee and the employee's family and household effects as a result of a transfer from one establishment of the employer to another or because the employee accepted employment at a place other than where the former home was located.

It must be noted however, that notwithstanding the foregoing administrative exception, subsection 6(23) of the Act specifically clarifies that for purposes of section 6, payments made by an employer in respect of the cost, financing, the use of, or the right to use, a residence are considered to be taxable benefits from employment and should be included in the employee's income. It is the CRA's position that this would include mortgage insurance premiums and the related application fees as they are in respect of the financing of a residence. The CMHC fees paid by the employer, whether for the old or the new residence, would therefore be a taxable benefit.

For expenses that are not reimbursed by the employer or only partly reimbursed, subsection 62(1) provides for a deduction for certain moving expenses when the individual moves to begin employment or business at a new work location or to begin full-time attendance at a qualified educational institution. To qualify, the individual's move must, among other things, meet the definition of an "eligible relocation" in subsection 248(1). The new residence must be at least 40 kilometres (by the shortest usual public route) closer to the new place of work or educational institution. However, the definition of "moving expenses" contained in subsection 62(3) excludes all costs incurred in respect of the acquisition of a new residence except legal fees in respect of the purchase, and any tax, fee or duty (other than GST/HST or value-added tax) imposed on the transfer or registration of title to the new residence. Accordingly, since CMHC fees do not fall into any of the foregoing categories, it is the CRA's position that they do not qualify as a deductible moving expense.

We trust that these comments have been of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch