21 May 2009 External T.I. 2009-0313341E5 - Deduction for 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.

Principal Issues: How should a taxpayer and the taxpayer's spouse or common-law partner claim the deduction for moving expenses where each has an eligible relocation in respect of the same move?

Position: General comments provided.

Reasons: Question of fact.

XXXXXXXXXX 							2009-031334
	Michael Cooke
May 21, 2009

Dear XXXXXXXXXX :

Re: Deduction for Moving Expenses

This is in reply to your email correspondence dated March 10, 2009, wherein you requested our views on the deductibility of moving expenses.

Briefly, in your correspondence you describe a situation wherein a taxpayer and the taxpayer's spouse or common-law partner sold their principal residence so that each could commence new employment in a new community ("new work location"). A new principal residence was purchased at the new work location and various moving expenses were incurred in connection with the move.

You ask how the two taxpayers should claim the moving expense deduction in these circumstances.

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 an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Circular and other publications referred to in this letter are available on our website at http:///www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of our website. Notwithstanding the above we are prepared to offer the following general comments.

Subsection 62(1) of the Income Tax Act (the "Act") provides that, subject to certain conditions and limits, a taxpayer may deduct moving expenses that are paid by the taxpayer in respect of an "eligible relocation". The term "eligible relocation" is defined in subsection 248(1) of the Act. For purposes of this discussion, it refers to a relocation that occurs to enable the taxpayer to carry on a business or to be employed at a new work location, where the new residence is located at least 40 kilometres closer to the new work location than the old residence. Both the old and new residences must be in Canada. It remains a question of fact as to whether a particular relocation will be an eligible relocation.

Assuming there is an eligible relocation, in order for a particular moving expense to be deductible by a taxpayer the amount must actually be paid by that taxpayer. For instance, if eligible moving expenses are paid by anyone other than the particular taxpayer, including the taxpayer's employer, such amounts would not be deductible by the taxpayer. Moreover, where the taxpayer has paid for eligible moving expenses but the taxpayer has received a reimbursement or allowance in respect of those expenses, no deduction in respect of those particular moving expenses is allowed unless the reimbursement or allowance is included in the taxpayer's income. In addition, any deduction must not exceed the taxpayer's income from the employment at that new work location for that year and no amount can be deducted if it has been previously been deducted.

Therefore, where a taxpayer and the taxpayer's spouse or common-law partner each have an eligible relocation as a result of the same change in residence, each person would generally only be able to deduct the amount of eligible moving expenses that he or she actually paid. However, in these situations, provided any deduction otherwise complies with the requirements of section 62 of the Act (for instance, the amount of any deduction is reduced by the amount of any reimbursement or allowance received by either taxpayer in respect of such expense and such amount is only claimed as a deduction once), the CRA generally will allow some flexibility in allowing the taxpayers to decide who will claim the moving expense deduction or how the deduction will be shared.

For more information on what eligible moving expenses a taxpayer is allowed to deduct in connection with an eligible relocation, including limitations on how much the taxpayer can deduct from income in a particular year with respect to the relocation, please refer to Interpretation Bulletin IT-178R3 (Consolidated), Moving Expenses, and Form T1-M, Moving Expenses Deduction.

We trust that these comments will be of assistance.

Yours truly,

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