Certified Relocation Professional (CRP) Practice Exam

If a company chooses to include reimbursed shipment and travel expense in income, what tax implication occurs?

1. A tax deduction is not allowed if the move meets Section 217 requirements

2. An "above the line" deduction is allowed without conditions

3. A tax deduction is available for reasonable expenses meeting Section 217 requirements

4. A "below the line" deduction would be required

The correct answer is: A tax deduction is available for reasonable expenses meeting Section 217 requirements

Choosing to include reimbursed shipment and travel expenses in income has specific tax implications under Section 217 of the Internal Revenue Code. When these expenses are reimbursed and included in the employee's income, they may be eligible for a tax deduction if they meet the requirements set forth by Section 217. This section allows individuals who meet certain criteria tied to their relocation—such as moving for a job or moving significant distances—to deduct reasonable expenses associated with their move from their taxable income. By recognizing these reimbursed expenses as income, the employee can subsequently claim a deduction for the costs that qualify under Section 217. This helps to offset the additional tax burden created by having these reimbursements included in their gross income. The options that suggest other deductions or variations do not align with the stipulations surrounding Section 217 and its benefits, as they misinterpret the nature of how relocation expenses are treated for tax purposes. Thus, acknowledging the specific allowances for deductions that directly tie back to the regulations of Section 217 is crucial for properly understanding tax implications in the context of relocation expenses.