Do the URA and IRS Align for Relocation Payments?
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Discussion
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Some tax preparers find it difficult to support the URA’s § 24.209 with the IRS Publication 544 and resort to requesting an IRS Private Letter Ruling.
The URA States: 49 CFR § 24.209 Relocation payments not considered as income. No relocation payment received by a displaced person under this part shall be considered as income for the purpose of the Internal Revenue Code of 1954, which has been redesignated as the Internal Revenue Code of 1986 (Title 26, U.S. Code)
Publication 544 States: Payments to relocate. Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Do not include them in your income. Replacement housing payments used to buy new property are included in the property’s basis as part of your cost.
Below is an IRS Private Letter Ruling conclusion for one particular displaced business. This will hopefully give you some guidance, however, your situation and results may differ.
(1) Pursuant to 42 U.S.C. § 4636, Taxpayer does not include in gross income under § 61 of the Code the relocation payments and additional payments described in § 42 U.S.C. §§ 4621-4638 it receives from State Agency.
(2) Taxpayer may not deduct under § 162 moving expenses for existing equipment, the installation of existing and substitute equipment, relocation expenses incurred at the new location and pre-existing locations and professional and service fees related to the relocation, including negotiation of the MOA with State Agency to the extent they were reimbursed with the relocation payments and the additional payments.
(3) Taxpayer may not assign any basis under § 1012 to substitute equipment acquired to replace non-movable equipment and leasehold improvements at the new location to the extent such costs are reimbursed with the relocation payments and the additional payments.
Let us know if you would like to know more about this or if you have information to share on this topic.
Code: 24.209
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Do the URA and IRS Align for Relocation Payments?
updated 1 year, 11 months ago
24.209 1 Member
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