Category Archives: 248(1)

Moving Expense of Employees – CRA Officer v CRA

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Moving Expenses of Employees – What is Deductible for Income Tax Purposes?

Sirivar v The Queen, 2014 TCC 24

At issue was whether paragraph 62(3)(c) which limited deductions for costs of meals and lodging to 15 days worth works to limit the deduction of lodging expenses that are properly moving expenses.

The TCC held that the 15 day limit only applies to room and board and is intended to extend deduction to expenses not properly “moving expenses” and not to limit proper moving expense deductions.


A CRA officer moved from Ottawa to Toronto to take up a new position with the CRA.  He spent one week in a hotel, and then rented a room in a private home, postponing his purchase of a home in Toronto because for 20 weeks after the  move he was required to work on large cases back in Ottawa (but was reimbursed only for 8 weeks).  There was also uncertainty which CRA office he would report to in Toronto.  He made claims for the room rental in Toronto, 9 trips to Ottawa, Ottawa home ownership expenses while that home was vacant, other travel expenses, and storage and moving expenses.

The CRA denied the all or part of the amounts claimed.


The Court began by reviewing Sections 62 of the Income Tax Act, and the definition of “eligible relocation” in subsection 248(1) of the ITA.

The court then referred to the decision in Storrow v. The Queen, [1979] 1 F.C. 595, dealing with the interpretation of 62(3), where it was said that moving expenses are “the ordinary out-of-pocket expenses incurred by a taxpayer in the course of physically changing his residence” and does NOT include (except as expressly included in subsection 62(3)) increased cost of a new residence over the old one, cost of installing household items from the old home in the new one, cost of refitting household items in the old residences, or outlays costs associated with the acquisition of the new residence.  “Only outlays incurred to effect the physical transfer of the taxpayer, his household, and their belongings to the new residence are deductible”.

The court then referred to the FCA decision in A.G. of Canada v. Séguin, 97 DTC 5457, moving expenses don’t include “accessory damages that are unrelated to the actual move to and resettlement in the new residence”, such as interest expenses on loans not pertaining to the physical move of the taxpayer.

Lodging expense deduction are limited to a period of 15 days by paragraph 62(3)(c) – refers to cost of meals and lodging for temporary accommodations – and is meant to capture things not otherwise considered to be “moving expenses”.  The TCC distinguished Christian v. The Queen, 2010 TCC 458, and said that there is no intention by parliament to restrict lodging expenses property part of moving expenses, but only to allow deduction of “room and board”.  Where the conditions of employment prolong the completion of an eligible relocation – in this case, because a permanent home could not be found until the exact workplace was identified by the employer – the taxpayer is not to be penalized for accommodating the needs of his employer.

The TCC allowed the expenses for lodging for the hotel and the room in a private residence but did not allow the other deductions.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Sangha v The Queen, 2013 TCC 63

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Income VS Capital? Sale of a House

Sangha v The Queen, 2013 TCC 63

At issue was whether the sale of a house by the two appellants was on capital or income account.

The court held that the sale was on account of income. What started as a commercial venture stayed a commercial venture.


The two appellants were good friends. Over beers, they decided one day to take advantage of rising property prices in Vancouver and bought an empty lot in Surrey.  After completing the sale, they decided to build a house on the property and then moved in with their respective significant others.  They listed the house on a self-list website but explain that the purpose was to allow their family in Kelowna to see the home.

Shortly after moving in things fell apart as the two friends’ significant others began bickering to the point that the two felt it might affect their friendship.


The Honourable Justice Campbell Miller began by referring to Happy Valley Farms Ltd v MNR, [1986] 2 C.T.C. 259 (FC), which sets out the test for distinguishing income from capital gain:

14        Several tests, many of them similar to those pronounced by the Court in the Taylor case, have been used by the courts in determining whether a gain is of an income or capital nature. These include:

1.         The nature of the property sold. Although virtually any form of property may be acquired to be dealt in, those forms of property, such as manufactured articles, which are generally the subject of trading only are rarely the subject of investment. Property which does not yield to its owner an income or personal enjoyment simply by virtue of its ownership is more likely to have been acquired for the purpose of sale than property that does.

2.         The length of period of ownership. Generally, property meant to be dealt in is realized within a short time after acquisition. Nevertheless, there are many exceptions to this general rule.

3.         The frequency or number of other similar transactions by the taxpayer. If the same sort of property has been sold in succession over a period of years or there are several sales at about the same date, a presumption arises that there has been dealing in respect of the property.

4.         Work expended on or in connection with the property realized. If effort is put into bringing the property into a more marketable condition during the ownership of the taxpayer or if special efforts are made to find or attract purchasers (such as the opening of an office or advertising) there is some evidence of dealing in the property.

5.         The circumstances that were responsible for the sale of the property. There may exist some explanation, such as a sudden emergency or an opportunity calling for ready money, that will preclude a finding that the plan of dealing in the property was what caused the original purchase.

6.         Motive. The motive of the taxpayer is never irrelevant in any of these cases. The intention at the time of acquiring an asset as inferred from surrounding circumstances and direct evidence is one of the most important elements in determining whether a gain is of a capital or income nature.

15        While all of the above factors have been considered by the courts, it is the last one, the question of motive or intention which has been most developed. That, in addition to consideration of the taxpayer’s whole course of conduct while in possession of the asset, is what in the end generally influences the finding of the court.

16        This test has been carried one step further by Canadian courts into what has generally been referred to as the “secondary intention” test. This has meant, in some cases, that even where it could be established that a taxpayer’s main intention was investment, a gain on the sale of the asset would be held taxable as income if the court believed that, at the time of acquisition, the taxpayer had in mind the possibility of selling the asset if his investment project did not, for whatever reason, materialize. In Racine, Demers and Nolan v. Minister of National Revenue, [1965] C.T.C. 150, 65 D.T.C. 5098 (Ex. Ct.) , Noel, J. provided the following summary of the secondary intention test at 159 (D.T.C. 5103):

… the fact alone that a person buying a property with the aim of using it as capital could be induced to resell it if a sufficiently high price were offered to him, is not sufficient to change an acquisition of capital into an adventure in the nature of trade. In fact, this is not what must be understood by a “secondary intention” if one wants to utilize this term.

To give to a transaction which involves the acquisition of capital the double character of also being at the same time an adventure in the nature of trade, the purchaser must have in his mind, at the moment of the purchase, the possibility of reselling as an operating motivation for the acquisition; that is to say that he must have had in mind that upon a certain type of circumstances arising he had hopes of being able to resell it at a profit instead of using the thing purchased for purposes of capital. Generally speaking, a decision that such a motivation exists will have to be based on inferences flowing from circumstances surrounding the transaction rather than on direct evidence of what the purchaser had in mind.

The court then reviewed the facts on this case, beginning with the premise that a house itself is not indicative of capital or inventory.  The court held that the sale was on account of income on the basis that

  • theappellants owned the property for a few weeks, suggesting a quick turn-around notlong term capital investment
    • Solange Palardy v The Queen, 2011 DTC 1188 – states that a home can be a principal residence even if only for a short while, but the court said that this case didn’t deal with the capital vs income distinction.
  • This was an isolated transaction, which suggests capital income
  • There was little work expended by the appellants themselves on the property
  • That the growing friction between the couples was not (the court held) the reason for the sale – there was always the intention to make a quick sale
  • The motive was a quick flip for profit because:

–        they gave virtually no testimony other than a weak winter market for such a change in direction. There was no evidence that the Vancouver market slumped in the winter and they were beyond the winter period in any event.

–        there was no corroborating evidence from any other family or friends to purport there was a change of direction by Mr. Sangha and Mr. Sekhon from a quick flip of a lot to residing in a home.

–        they obtained at the outset an appraisal suggesting they could make significantly more if the lot was sold with a house on it.

–        the contract for acquiring the property stipulated they were to build.

–        they got a building permit on the acquisition of the property.

–        they registered for GST for constructing a house before acquiring the property.

–        their actions after the acquisition of the property confirmed their ongoing intent to build and sell quickly:

–        they listed the property for sale before they even stepped foot into it.

–       they acquired For Sale signs upon possession.

–        they never fully moved in (more on that later)

The Court concluded that the appellants were engaged in an adventure in the nature of trade – what started as a commercial venture remained so.  The court didn’t believe the “convenient answers” provided by the appellants.

Although the court didn’t need to address the principal residence issue, the court concluded that the couples didn’t have the home as their primary residence – there was little sign of having moved in with an intention to have it be a primary residence.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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