10 July 2003 External T.I. 2003-0012645 - ELIGIBLE RELOCATION - ORDINARILY RESIDED

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether moving expenses may be deducted where relocation is not an eligible relocation pursuant to ss. 248(1).

Position: No.

Reasons: Where a relocation is not an eligible relocation no deduction under s.62 can be claimed.

XXXXXXXXXX 		2003-001264
P. Massicotte, CA, M.Fisc.
July 10, 2003

Dear XXXXXXXXXX:

Re: Moving Expenses

This is in response to your letter sent to us by fax on April 8, 2003, in which you ask whether expenses incurred by a taxpayer in respect of a particular relocation may be deducted pursuant to section 62 of the Income Tax Act (the "Act"), even though the particular relocation does not qualify as an eligible relocation, as defined in subsection 248(1) of the Act.

The facts of the situation submitted to us are as follows:

1. Mr. X was employed in XXXXXXXXXX ("old work location") and resided nearby with his family ("former residence").

2. In XXXXXXXXXX, at the employer's request, Mr. X was required to begin working in XXXXXXXXXX ("new work location").

3. Mr. X and his family moved from XXXXXXXXXX to XXXXXXXXXX, ("first new residence") in XXXXXXXXXX ("first relocation") to enable him to begin working at the new work location.

4. The distance between Mr. X's former residence and the new work location is at least 40 kilometres greater than the distance between the first new residence and the new work location.

5. Mr. X's employer paid the costs associated with the first relocation from XXXXXXXXXX to XXXXXXXXXX. Mr. X did not claim any deduction pursuant to section 62 of the Act in respect of these costs, and did not include in his income any of the amounts paid by his employer either.

6. You indicate that, as the requirement to move from XXXXXXXXXX to the new work location occurred quickly, Mr. X and his family did not have sufficient time to obtain permanent housing. In XXXXXXXXXX, Mr. X and his family moved ("second relocation") from the first new residence to a second dwelling within the same area ("second new residence").

7. The taxpayer paid all the costs associated with the second relocation. No financial assistance from his employer was made available to him in respect of the second relocation.

In your opinion, the first relocation would qualify as an eligible relocation, as defined in subsection 248(1) of the Act, as it meets all the requirements of that definition. You mention however that the second relocation would not qualify as an eligible relocation as the relocation did not bring Mr. X closer to his place of employment by at least 40 kilometres. Notwithstanding the above, you ask whether a deduction under section 62 of the Act may be claimed in respect of the second relocation.

Our Comments

The particular situation outlined in your letter appears to be a factual one, involving specific taxpayers. 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. Where the transactions are completed, such as in this case, the enquiry should be submitted along with all relevant facts and documentation to your local Tax Services Office for their views. However, we are prepared to provide you with the following general comments.

A deduction under subsection 62(1) of the Act is allowed, subject to certain conditions and limits, only for moving expenses paid by a taxpayer in respect of an eligible relocation. The definition of the expression "eligible relocation" in subsection 248(1) of the Act provides, in part, that an eligible relocation is a relocation that occurs to enable the taxpayer to be employed at a new work location in Canada, where both the residence at which the taxpayer ordinarily resided before the relocation ("old residence") and the residence at which the taxpayer ordinarily resided after the relocation ("new residence") are in Canada, and the new residence is located at least 40 kilometres closer to the new work location than the old residence was.

We are not in a position to comment on which of the above moves may qualify as an eligible relocation, as the determination as to where a person ordinarily resides at a particular time is ultimately a question of fact which can only be determined upon an examination of all relevant facts in the situation. For purposes of the moving expense deduction, the courts have generally taken the view that the term "ordinarily resided" should be given the connotation ascribed by the Supreme Court of Canada in the case of Thomson v. MNR, 2 DTC 812, such that a person is ordinarily resident in the place where, in the settled routine of his or her life, he or she regularly, normally, or customarily lives and should be contrasted with special or occasional or casual residence. The concept of "residence" for income tax purposes was also described by the Supreme Court of Canada in the case of Thomson to be "chiefly a matter of degree to which a person in mind and in fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question".

While the determination as to where a person is ordinarily resident is ultimately a question of fact, it is generally our opinion that where an individual is living in temporary accommodation, such as a hotel, motel or other similar arrangements (with limited living facilities, such that the stay is more casual in nature), he or she would not ordinarily reside at that location for purposes of the definition of "eligible relocation" in subsection 248(1) of the Act. By contrast, where an individual can be considered to ordinarily reside at a particular new location, he or she would be considered to have established a new residence at that location for the purposes of that definition.

Where a taxpayer moves from a residence at which he or she ordinarily resided before the relocation to a new residence at which he or she ordinarily resided after the relocation, but the particular relocation does not meet all the other requirements of an "eligible relocation", as defined in subsection 248(1) of the Act (such as the 40 kilometre test referred to above), no deduction may be allowed under section 62 of the Act for the expenses incurred in the course thereof. In the above situation if, as you indicate, the first relocation met all the requirements of an eligible relocation, the second relocation cannot qualify as an eligible relocation.

You also ask whether Mr. X would have been eligible to claim a deduction for any out-of-pocket expenses relating to a relocation that were not reimbursed by the employer. We do not have sufficient information to determine whether such expenses would have been deductible in the present situation. However, we would note that paragraph 62(1)(d) of the Act provides that a deduction for moving expenses (as described in subsection 62(3) of the Act) incurred in respect of an eligible relocation may only be allowed to the extent all reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer's income (see also the information provided with the Form T1M, Moving Expense Deduction).

We trust the above comments are of assistance to you.

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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