2019-0825431E5 Tenant relocation assistance

Principal Issues: Whether certain amounts received by tenants displaced from their existing residential rental units would be included in their income.

Position: Question of fact, but likely not in this situation.

Reasons: Amounts received by displaced tenants that is intended to compensate for moving/relocation expenses would not be included in income as these amounts would not be considered income from a source.

Author: Brennan, Christopher
Section: 3, 12(1)(x), 56(1), 56(2)

XXXXXXXXXX                                                                            2019-082543
                                                                                                    Chris Brennan
October 4, 2019

Dear XXXXXXXXXX:

Re: Tenant relocation assistance

This is in reply to your email of September 26, 2019, where you request our comments as to whether certain amounts received by tenants displaced from their existing residential rental units would be included in their income.

The following information was obtained in regards to your request:

*     The City of XXXXXXXXXX’s existing tenant assistance policy states that where a rezoning application involves XXXXXXXXXX tenanted dwelling units in a multiple family rental building, and includes the anticipated demolition or renovation of the units to the extent that tenants must permanently relocate, applicants must submit a XXXXXXXXXX (Plan);

*     An applicant’s Plan must provide for a lump-sum amount to be paid to each displaced tenant, which is intended to compensate the displaced tenant for moving expenses, utility reconnection fees, and relocation costs;

*     A displaced tenant may be required to temporarily reside in a residence that has a greater rent cost than the existing rent of the original residence. The City of XXXXXXXXXX has made a recommendation that each displaced tenant impacted by demolition and renovation have the option to receive a top-up supplement amount while awaiting return to their original or rebuilt unit. The top-up supplement would be equal to the difference between existing rent and rent for temporary accommodations, up to an established cap. The top-up supplement amounts would be paid by the applicant directly to the displaced tenant or to the landlord of the temporary accommodation; Each displaced tenant will have the option to either receive the lump-sum amount or receive the top-up supplement amount;

*     Both the lump-sum and the top-up supplement amounts are paid by the applicant, which is generally the owner of the residential building that is anticipated for demolition or renovation;

*     Eligibility to receive the lump-sum or the top-up supplement amount is not based on a financial means, needs or income test of the displaced tenant.

Specifically, you have asked whether a lump-sum amount or a top-up supplement amount would be included in the displaced tenant’s income, pursuant to the provisions of the federal Income Tax Act (Act).

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Generally, an amount is taxable under the Act if it constitutes income from a source or if a specific provision of the Act applies to the type of payment. If the income does not fall within one of these sources of income, it is generally not taxable.

Ultimately, whether an amount received by an individual needs to be included in income depends on the nature of the payment and the facts of the situation. Based on the information obtained, regarding the lump-sum and top-up supplement amounts, it does not appear that these amounts would constitute income from a source, including social assistance under paragraph 56(1)(u) of the Act, and therefore would not be included in income and would not be taxable under the Act.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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