Sue and George Shaker lived in Halifax, Nova Scotia, while George completed his combined law and MBA degree at Dalhousie University. The Shakers purchased a home in Halifax when they first moved to Nova Scotia. Due to contracting mononucleosis in his second year of the program, George completed his degree in December 2012 rather than in the spring of 2012.
George excelled in the program and had numerous job offers. He finally accepted a job with NorthAm Co. in Toronto. In order to convince George to accept the job, North Am Co. offered to pay the Shakers an amount equal to any loss that they incurred on the sale of their Halifax home and provide them with a $10,000 moving allowance.
Sue has been working for an insurance company in Halifax while George has been attending school. Sue intends to find work in Toronto, but will be unable to continue working for the same insurance company.
George accepted the job with North Am Co. in September 2012. During October 2012, George and Sue flew to Toronto to look for a home. They spent a week in Toronto and on the fifth day managed to find and purchase a home with the purchase contract closing on December 15, 2012. The remaining two days were spent arranging for painting and cleaning of the new home. Their expenditures on that trip were:
Two Air Canada tickets (return Halifax to Toronto)$ 1,200
Motel room, 7 days @ $75 per day525
Meals, 7 days @ $50 per day350
Car rental350
George and Sue managed to sell their Halifax home. That sale closed on December 15, 2012. The statement of account from the lawyer (dated January 15, 2013) revealed the following expenses:
Real estate commission$7,000
Legal fees, old home2,000
Legal fees, new home2,500
Land transfer tax, new home 1,000
The house in Halifax was sold for $140,000. The Shakers had originally paid $160,000 for the house. NorthAm Co. provided a cheque for $27,000 in February 2013 to reimburse them for the loss and the real estate commission. (NorthAm Co. did not include the legal costs when calculating the loss eligible for reimbursement.)
Subsequent to finalizing the sale of their Halifax home and George's completion of his exams, Sue and George packed up their car and drove to Toronto. The trip took 7 days due to a leisurely pace and some bad weather delays, and since their home was not ready when they arrived, they stayed in a nearby motel for 11 days.
The cost of trip and stay in motel was as follows:
Meals, 18 days @ $100 (substantiated by receipts) $1,800
Motel room, 18 days @ $80 1,440
Gasoline (2,000 kilometres driven) 250
In late December, the Shakers paid a moving bill consisting of $5,000 for the actual move and $250 for storage. George received the $10,000 allowance for moving expenses in December 2012. He commenced work for North Am Co. in January 2013 at a salary of $80,000 per year. Sue commenced work for Toronto Insurance Co. in September 2013 at a salary of $85,000 per year.
REQUIRED
Calculate the allowable moving expenses for the Shakers for both 2012 and 2013. Discuss the tax treatment of the loss reimbursement. Assume that all expenditures made were reasonable and can be substantiated by receipts.
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