10 January 1990 Income Tax Severed Letter AC58903 - 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.

5-8903
                                             A. Humenuk
19(1)                                        (613) 957-2135
Dear Sirs:

Re: Moving Expenses

We are replying to your ,letter of October 3, 1989, concerning the taxation of benefits arising from an employer's payment or reimbursement of an employee's moving expenses.

You have provided us with a list of typical costs that may be incurred in moving. You have asked for our comments as to whether or not the reimbursement of these costs by the employer would represent a taxable benefit to the employee.

We shall assume for the purpose of our response that the amount expended by the employee arises as a result of his relocation by his employer and that the amount is reasonable in the circumstances.

Your list includes the following items which, in your view, would not constitute a taxable benefit if reimbursed by an employer:

A. Expenditures relating to the old home

     1.   Disconnection charges for:
               telephone,
               T.V. aerial,
               water,
               space heater,
               air conditioner,
               barbecues,
               automatic garage doors,
               water heater.

     2.   Premiums paid to discharge a mortgage where purchaser
          does not assume the mortgage.

     3.   Expenses to carry the old home after moving into the
          new home where a sale of the former residence was not
          successfully completed including:
               mortgage interest,
               property taxes,
               heat,
               hydro,
               insurance,
               gardening.

     4.   Cast of cleaning the Lomer residence for purposes of
          the sale. 

B. Expenses incurred by the employee with respect to his place of residence subsequent to the relocation

     1.   Connection fees for the following only where they
          existed at the old residence:
               telephone,
               water,
               heating,
               hydro,
               T.V. antennas,
               barbecues,
               water softeners,
               water heaters,
               air conditioners,
               automatic garage door openers,
               space heater,
               installation of carpets, curtains, drapes and
               tracks.
     2.   Costs and fees for acquisition of new automobile
          licences.

     3.   Legal fees and land transfer taxes incurred in
          acquiring new accommodation.

     4.   Costs incurred to adapt household belongings to the new
          location where such items were owned at the old
          residence such as alterations to household furniture,
          adjustments to drapes, blinds and carpets, and plumbing
          and wiring modifications.

C. Certain miscellaneous expenses incurred by the employee with respect to the relocation

     1.   Expenses incurred by the employee and spouse to search
          for a home at the new location.

2. Legal costs of will revisions necessitated by the move.

     3.   Interim living expenses subsequent to the move where
          permanent accommodation is not yet available, provided
          the duration of the stay in the interim accommodation
          is reasonable.

     4.   Long distance telephone charges in connection with the
          disposition of the former residence or the acquisition
          of the new residence.

5. Cost of moving goods other than household goods.

Although we would generally agree with your position on these expenses, we would like to point out that the reimbursement of the expenses described in A-3 above would only be non-taxable if all reasonable efforts were being made to sell the former residence. In respect of the item described in B-2, we note that, in the same manner as with items listed in B-1, the reimbursement of costs and fees for new automobile licences would only be non-taxable if the vehicles were owned at the former residence. Finally, in respect of the expense described in C-3, we would like to point out that permanent accommodation as referred to therein would, in our view, include property that was rented by the employee as a principal place of residence as well as property that was purchased by the employee.

You state that we would consider the following expenses to be taxable benefits if the employer reimbursed the employee:

A. Expenses incurred by the employee with respect to his or her place of residence prior to the relocation

     1.   Payment of cancellation fees and premiums on the
          cancellation of service contracts and insurance
          policies.

     2.   Losses on abandonment of fixtures or perishable goods
          which cannot be moved or where the moving costs would
          exceed the value of the goods.

     3.   Losses on the unused portion of fees that are incurred
          on yearly or some other periodic basis.

B. Expenses incurred by the employee with respect to his or her place of residence subsequent to the relocation

1. Piano or organ tuning.

     2.   School transfer fees and initiation fees to join
          athletic and social clubs.

     3.   Costs related to the new residence such as painting,
          papering, new rugs, new drapes, pre-purchase inspection
          fee, appraisal fee, finder fee, etc.

C. Allowances

          Any amount given as an allowance such as one month's
          salary, to cover other expenditures will be required to
          be included in the employee's income.  In order for the
          payment not to be considered a taxable benefit it must
          be a reimbursement of expenditures which are supported
          by receipts which are submitted by the employee to the
          employer.

This is our position with respect to items A and 8. However, while we agree in principle that the allowance described in item C would be a taxable benefit, we would like to point out that on page 50 and 51 of the enclosed 1989 Employee's and Trustee's Guide for Filing T4-T4A and T4F Returns it states that non-accountable allowances up to but not exceeding $500 will be considered a reimbursement provided that the employee certifies in writing that incidental expenses in excess of any other reimbursement have been incurred.

We trust our comments will be of assistance to you.

Yours truly,

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

enclosure