| 920705 | |
| A. Humenuk | |
| (613) 957-2134 |
April 22, 1992
ST. JOHN'S TAXATION CENTREBusiness and General Division Assessing DivisionTaxpayer Services Section
Attention: Lorne H. Warren
Moving expenses into and out of Canada
We are replying to your memorandum of February 28, 1992 in which you ask for our opinion as to whether a 19(1) 19(1) findings of the court in Silburn v MNR 85 DTC 463. You have asked for our comments as to whether a deduction should be allowed for either of the moves. From your description, it appears that the case before you is very similar to that of Silburn notwithstanding the changes made to section 63.1 when it was reintroduced as section 64.1 of the Act: both professors were on sabbatical leave receiving partial salary, both completed their studies outside of Canada. In the Silburn case however, the claim under dispute was only for the expenses incurred in returning to Canada and not for the expenses incurred in moving to Italy. Once it was established that Mr. Silburn ordinarily resided in Italy before he returned to Canada within the context of section 62 of the Act and that he was a deemed resident of Canada by virtue of section 250 of the Income Tax Act, the Court reasoned that his moving expenses to Canada should be allowed.
Note that the Court distinguished between the meaning of "ordinarily resided" as the term is used in section 62 of the Act and the meaning of "ordinarily resident" as the term is used in determining whether a person is subject to Part I or Part XIII tax. Given that one of the reasons for section 64.1 of the Act is to permit residents of Canada who are absent from Canada for all or part of a taxation year to claim a deduction for moving expenses while denying immigrants and emigrants a similar deduction, the test for residency in section 62 of the Act at the former place of residence is not necessarily the same as that found in Interpretation Bulletin IT-221R2 "Determination of an Individual's Residence Status". The use of the phrase "ordinarily resided" in section 62 would operate to deny moving expenses to someone who merely sojourned in another place without setting up a residence in that place (i.e. an extended visit, a vacation).
One issue which was not fully addressed in the Silburn case was whether the taxpayer had commenced to carry out one of the activities (business, employment or education) described in that section at a new work location. On page 468 of the Silburn case, the court accepted the uncontradicted evidence that the taxpayer remained under the instruction of and subject to the direction of the University, his employer. However, it is our understanding of sabbatical leave that an employee is usually not under direction of the employer during a period of sabbatical leave despite the fact that salary may continue.
While moving expenses are deductible by an employee who relocates more than 40 kilometres to a new location in order to work for the same employer but at a different work site, an employee who returns to his former work location after a period of leave is not similarly so entitled. In order to claim his moving expenses to the 19(1) the taxpayer must show that he has commenced to either be employed at, carry on business at or be a full time student at the new location. If the activity which he commenced at the new location was that of study, then his claim for moving expenses is restricted to any scholarships or bursaries received. It should be noted however, that the scholarship or bursary income need not be received from the 19(1) In our view however, the continuation of salary for the period of leave in the taxpayer's circumstances cannot be considered as scholarship or bursary income.
If on the other hand, his employer directed him to work at the new location, then his moving expenses would be deductible to the extent of his income from the new work location. Additionally, the moving expenses for the return to Canada would likely be deductible provided that the taxpayer could establish that his expenses otherwise met the criteria for deductibility under section 62 of the Act.
P.D. Fuocofor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch