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Tax FAQ's

Frequently Asked Tax Questions
Q: What are the income tax and capital loss ramifications on a home sale program to a company or transferee?
A: In a home sale program, the company is never involved in these two areas. The transferee is not allowed to deduct a capital loss on residential property used as a residence (as opposed to being used as a rental property). Whether a home sale program is or isn't used by the transferee, there is no capital gains income tax on the sale if the "2 year rule" is met and the gain does not exceed $250,000 for a single transferee or $500,000 for a married transferee. There are very few situations where a home sale generates taxable income under these rules.
Q: Hi, Art. We are a third party provider. A client company's CFO, who is the transferee, signed a 9 month lease for his temp living place. Before the 9 months expired, he bought a house and moved out. In the meantime another EE has moved in, but because the lease is in the CFO's name he will continue to submit for reimbursement even though another EE is living there. Will the tax liability now fall under the new EE or will it still be the CFO, as he is being reimbursed?

Their comment to me was, "but if we were paying and a different EE moved in, the tax liability would be under the new EE."
A: I think the second EE is the transferee reaping the "current" benefit of company paid temp living. The second EE should be reimbursing the CFO, and the company should be reimbursing the other EE.

If, for example, the CFO moved out after six months, only those six months should be in "his Tally-Up! record" (and his payroll/w-2 record) and grossed up for him. The balance of three months (assuming the other EE is there three months) should be in the other EE's Tally-Up! and payroll/w-2 record and grossed up.

It's a little unusual since the lease is in the CFO's name, but it should ultimately not affect the normal relocation expense tracking and tax treatments.
Q: Hi Art.  We moved an employee from Massachusetts to New York. He paid for his wife's goods to be moved from Greece to New York (they were just married), and we reimbursed him for this expense.  Is this non-taxable?
A: The estimated cost of moving his wife's goods from Massachusetts to New York is the only expense that would be non-taxable. The rest is taxable. For example, if it cost $10,000.00 to move the wife's goods from Greece to New York, but the estimate of that goods move from Massachusetts to New York is $3000.00, then $7,000.00 would be taxable and $3,000.00 would be excludable.
Q: Art, we are processing a transferee who relocated to Florida from Illinois. She had her household goods packed and stored at origin (her request). She was in temp living in Florida for 8 months when she was laid off.

She has left Florida and has gone back to Illinois.  I just received her invoice for the move into storage at origin plus 60 days of storage (the additional days are being billed to her).  What is non-taxable here?

There is also a chance the company she worked for is going to pay her delivery out of storage, but we are awaiting word on that.
A: The invoice for the move into storage plus the first 30 days storage is excludable. The next 30 days the company reimbursed is taxable income (only 30 days excluded on a domestic move).  If the company she worked for pays for the delivery out, that would also be excludable.
Q: Hi Art. We are moving a family from coast to coast. They have a daughter that will need a medical flight for the final move trip. At this time we have been quoted a cost of approximately $20,000. Because of the high cost, would some or all of this be a taxable expense?
A: No. It's unusual, but it's definitely excludable as a final move expense.
Q: Hi Art, can you answer this question? An employee who is relocated by the company does not qualify for the 50 mile rule, but the company has decided to pay for his relocation regardless.

Since this will be a non qualified move, am I correct that the household goods direct bill, transportation & lodging on the final trip, loan origination/discount points on new home purchase will need to either be added to income and grossed up for taxes or withhold taxes from the employee?
A: You are correct on the HHG direct bill and the transportation and lodging on the final trip. They both become taxable income to the employee. 

Any loan origination fees or discount points are always taxable income to the employee. The reason they are not grossed up for federal income purposes, and in most cases, state income purposes, are because they are deductible to the employee as itemized deductions on Federal Schedule A

FYI, these "deductibles" are always subject to withholding as supplemental income during the course of the year to keep in federal compliance, but are "trued-up" at year end.
Q: A frequently relocated employee got a divorce after the last relocation, and the employer agreed to pay for the move of the spouse's household goods back to the "original" location. Is this reimbursement of the household goods move excludable?
A: No. An employee must be taking a new position in a new location for the move of the household goods to be deemed excludable.
Q: When you and your company agree to your relocation, are the costs incurred to ready your home for sale deductible on your tax return?
A: Unfortunately, no. These costs were never separately deductible on your tax return. Many of these costs are considered as permissible home sale costs and they increase the basis in your home, therefore lowering the capital gains tax on the gain from the sale. This issue has become more or less a moot point with the new capital gains laws on the sale of your primary residence, where very few transactions now exceed the amount of the IRS allotted gain exclusion.
Q: I understand that storage in transit is deductible, but does it have a maximum of 30 days or just whatever length of time needed prior to being delivered to the new residence? I had previously thought that domestic storage was deductible for 30 days only and after that period the storage expense needed to be grossed up. But one of my van lines disagrees with me.
A: Storage costs for a Domestic move are excludable (they are considered transit costs) for 30 days only! There is no limitation of days for an International move.

After 30 days, storage costs for a Domestic move that are reimbursed are treated as taxable income (like House Hunting or Temporary Living, for example). Your van line is incorrect.

The excludable portion of storage costs are commonly entered into Tally-Up! in the transit costs screen with an A1 code. If the domestic transferee is reimbursed for storage costs over 30 days, (or the client pays the van line directly for these costs), the portion over 30 days should NOT be entered in the transit cost table. You should create a user-defined expense of "Storage>30" with an EY code and use it for the portion of the costs over 30 days.
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