Relocation payments did not have to be reported as income.

The IRS confirmed in a private ruling made public in January that a taxpayer did not have to pay income taxes on relocation payments from a state agency that used eminent domain to require him to move his business. A special federal statute makes clear that relocation payments by state agencies implementing federally-assisted programs do not have to be reported as income. The same rule applies to direct payments by federal agencies under federal programs.

The statute is 42 USC § 4636.

The ruling is Private Letter Ruling 201401001. The IRS said the taxpayer could not deduct the reimbursed moving costs and could not claim “basis” in any replacement equipment or other assets purchased with the relocation payments.

by Keith Martin