Too close for CRA's comfort

National Post

2010-07-17


Moving this summer? If so, you may be able to write off those moving expenses, provided you move 40 kilometres or more to be closer to work.

The question is, how is that distance measured? That was the subject of a recent Tax Court of Canada decision earlier this year involving David Lund, who moved from Oakville, Ont., to downtown Toronto in 2007 and deducted his moving expenses from his income.

The issue was whether the distance from his old residence in Oakville to his new work location should be determined based on Mr. Lund's preferred travel route, which totalled 53 kilometres, or on the CRA's route, which measured 33 kilometres.

Under the Income Tax Act, to be entitled to deduct moving expenses, the distance between your old residence and the new work location must be 40 kilometres greater than the distance between your new residence and the new work location.

Mr. Lund's new residence in downtown Toronto is approximately 10 kilometres from his new work location meaning that, under his calculation (53 km minus 10 km), he would qualify to write off his moving costs since the total distance would be more than 40 km. Using the CRA's route, however, the expenses would be disallowed since the driving difference would only be 23 km(33 km minus 10 km).

Mr. Lund measured his distance between his Oakville home and the new work location based on his preferred route of travel during rush hour. He testified that to beat traffic, he would avoid the busy Queen Elizabeth Way (QEW) highway, using instead a series of highways going north, east and then back south again.

As Mr. Lund testified, "there is no doubt in anyone's mind on this planet that [the QEW] is the shortest route." But he went on to describe it as "a nightmare" that "becomes congested very quickly."

He felt that the quickest way to get to work was to take his preferred route, which he described as "the most effortless, stress-free way, most of the time."

Mr. Lund even had an expert witness, a limousine driver, testify at trial. He confirmed Mr. Lund's route as his preferred route of travel as well. In addition, Mr. Lund also brought to court pages from the website of the Ministry of Transportation showing the traffic density on each of the two routes.

The judge, citing a prior decision from the Federal Court of Appeal, rejected a measurement based on an individual's "normal route" and instead stated that the correct test should be the "shortest normal route."

As result, the judge found that the QEW route, being clearly shorter that Mr. Lund's own preferred route, was the one to be used under the test, since "the test is not based on the route that takes the least amount of time."