After being downsized by his former employer, in November 2014, Wayne moves from

Question

After being downsized by his former employer, in November 2014, Wayne moves from Minnesota to Aialxima to accept a new job. When filing his Federal income tax return for 2014, Wayne deducts the $14,000 in mov ing expenses he incurred (none of which were reimbursed by either his former or new employer). On June 6f 2015. Wayne's employment terminates. What are the tax consequences i the termination occurred because: Wayne was killed by a drunk driver? Wayne was downsized by the new employer? Wayne was fired by the new employer because ite assaulted a client? Wayne quit because he inherited a large amount of money and decided he did not want to work anymore?

Explanation / Answer

As per the provisions of IRS, a taxpayer can deduct moving expenses if he/she satisfies the time test of full time employment of 39 weeks in a period of 12 months in his/her employment at the new location.

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The below mentioned table highlights the tax consequences with respect to moving expenses along with reasons:

Tax Consequence Reason Case a Recapture Not Necessary In case of death or disability, the time test of 39 weeks (in the current employment) is not considered for allowing the deduction with respect to moving expenses. Therefore, recapture is not necessary. Case b Recapture Not Necessary In case of discharge for a reason other than wilful misconduct, the time test of 39 weeks (in the current employment) is not considered for allowing the deduction with respect to moving expenses. Therefore, recapture is not necessary. Case c Recapture Necessary In this case the termination occurred because of wilful misconduct/misbehaviour of Wayne before the expiry of 39 week test, therefore, recapture becomes necessary as per the provisions of IRS. Case d Recapture Necessary In this case, Wayne has wilfully quit the job and the time test of 39 weeks of full time employment has not expired. Therefore, the deduction with respect to moving expenses cannot be allowed and recapture becomes necessary.

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