29 October 1997 External T.I. 9716445 - RELOCATION OF AN 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:

1) Can an employee eligible for moving expenses with beneficial ownership of residence avail himself of the position in paragraph 37 IT 470R where there is an actual loss on the disposition of a home?

2) Is a payment by the employer to buy-out a car lease of an employee considered a taxable benefit?

Position:

1) YES, 2) YES

Reasons:

1) IT Position, 2) 6(1)(a)

971644
XXXXXXXXXX C. Tremblay

Attention: XXXXXXXXXX

October 29, 1997

Dear Sirs:

Re: Relocation of an Employee

This is in reply to your letter of June 16, 1997, with regards to the taxability of certain payments made to an employee who is being relocated.

Generally, an employee must move to a new residence at least 40 kilometres closer than his former residence to his new work location to qualify for moving expenses.

A "family home" is not defined in the Act, however, in our view the term "family home" generally refers to the principal residence of an individual and his immediate family; the place where they ordinarily reside. In determining what constitutes a "family", it should be noted that an unmarried adult with no children constitutes a separate family. The term "beneficial ownership" is used to describe the type of ownership of a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. Accordingly, a person who has beneficial ownership, a question of fact, can avail himself of the position set out in paragraph 37 of IT-470R which continues to reflect the Department's position with respect to the reimbursement of an actual loss incurred by the employee in respect of the disposition of the employee's home as determined with reference to the cost of the home to the employee. An actual loss is incurred when the proceeds from the disposition of the residence is less than its cost to the employee. For this purpose, the cost of a home includes the purchase price and the amount paid for any capital improvements but does not include regular repair and maintenance costs.

In our view, a payment by an employer to buy-out an auto lease of an employee to allow the return of the vehicle to the auto dealership is a taxable benefit received or enjoyed by the employee in respect of, or by virtue of, an office or employment and taxable pursuant to paragraph 6(1)(a) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch