Time and distance tests

Moving expenses incurred by a transferee, within 12 months of starting work in the new location, may be qualified moving expenses. The transferee would need to pass both the time and distance tests as set forth by the IRS. 

Time Test

To meet the time test a transferee must work full-time at least 39 weeks during the first 12 months after arriving in the new work location.

Distance Test

The distance test is based on the location of the transferee’s former home, the location of his/her old place of work, and the location of his/her new place of work. The transferee’s new place of work must be at least 50 miles further from his/her old residence than his/her old place of work was from his/her old residence. For instance if a transferee’s old commute was 10 miles from home to work.  His/her new place of work must be located at least 60 miles (10 + 50) from his old residence.  The location of the new home does not factor into the equation.

One last item to remember is home purchase programs do not have to meet the 50-mile or one-year rules.  Distance, time and one-year rules are limited to moving expenses. It does not matter if the purchase of a home from the transferee occurs beyond the 12 month window or if the move does not meet the 50-mile rule.  As long as there is a company business purpose for the purchase, and it meets standards for home purchase programs such as those established in the “eleven key elements of an amended value program” homesale costs will not be taxable to the transferee.

For more on this topic, see 50-mile/one-year rules and home purchase programs  in the Worldwide ERC® Tax & Legal Master Source.

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