Moving expenses can't always be deducted: Courts can't extend laws to cover new areas, judge notes
Given the particularly harsh winter we've experienced in much of the country
so far this year, the thought of moving closer to work to cut down on the
commute certainly seems more tempting than ever.
Say you make the plunge and relocate to be closer to your employer -- would
your moving expenses be tax deductible?
The Tax Court of Canada was faced with exactly that question in a case
decided last month.
Percy Broydell, an employee of Falcon Lumber Limited, moved in 2002 from his
home in Innisfil, Ont. to South Barrie, Ont. and claimed moving expenses of over
$16,000 on his 2002 income tax return.
Prior to moving, Mr. Broydell had to catch the GO commuter train to get to
work and as a result, missed work several times, especially during the winter
months. He decided to move closer to public transportation where he "would have
no problem getting to work regardless of weather conditions and (thus) ensure
(his) continued employment."
Under the Income Tax Act, in order to be eligible to deduct your moving
expenses, you must move at least 40 kilometres closer to your new work location.
While there was no doubt that Mr. Broydell did indeed move 40 kilometres closer
to work, the question the court was faced with was whether the relocation
occurred "to enable (Mr. Broydell) to be employed at a new work location or
whether special circumstances existed to permit the Court to expand that concept
to a notion of relocating to retain employment at the same work location."
Mr. Broydell testified that he contacted the Canada Revenue Agency about the
possibility of claiming his moving expenses based on "special conditions." The
CRA official, after checking with her superior, advised Mr. Broydell to claim
his moving expenses.
He submitted his 2002 tax return and enclosed a letter acknowledging that he
had not changed jobs during the year but that he had "special reasons" for the
move and explained why his claim should be allowed.
He specifically noted his prior telephone conversation with the CRA in his
letter. Notwithstanding the letter, his claim for moving expenses was denied.
In his defence, Mr. Broydell argued that his case was similar to 2001 tax
case in which, due to "special circumstances," moving expenses were allowed. In
that case, the Tax Court allowed the employee's moving expenses to a new home
because the employee was now required to work from his office in his own home as
opposed to the employer's place of business.
The judge concluded that the facts in the 2001 case were distinguishable from
the facts in Mr. Broydell's case since Mr. Broydell did not have a new work
location and therefore did not meet one of the requirements of the Act. As the
judge wrote, "Courts are bound by the statutory requirements and cannot extend
them to capture a situation not envisaged by those statutory requirements."
Before dismissing the case, the judge commented on Mr. Broydell's reliance on
the CRA's advice, reiterating the Court's standard admonition that
"representations or advice given by representatives of Revenue Canada on
questions of interpretation of the law cannot override the law."