CRPA Tax, Legal, & Financial Considerations 2 — Questions and Answers
Question 1: Under IRS rules, which relocation expense is generally excludable from an employee's gross income when paid or reimbursed by an employer?
- Moving of household goods and personal effects (Correct answer)
- House-hunting trip expenses
- Temporary living expenses at the new location
- Loss on sale of former residence
Correct answer: Moving of household goods and personal effects
After the Tax Cuts and Jobs Act of 2017, only moving expenses for active-duty military members are excludable; however, the historical rule excluded household goods moving costs for qualifying civilian moves.
Question 2: A homesale program that guarantees an employee a minimum purchase price for their home is known as a:
- Amended Value Sale
- Guaranteed Buyout (GBO) (Correct answer)
- Direct Reimbursement Plan
- Buyer Value Option (BVO)
Correct answer: Guaranteed Buyout (GBO)
A Guaranteed Buyout (GBO) provides the employee a guaranteed offer price based on an average of appraisals, protecting against market risk.
Question 3: In a Buyer Value Option (BVO) program, when does the employer technically purchase the employee's home?
- When the relocation management company issues the appraisal
- When the outside buyer makes an offer that the employer matches (Correct answer)
- At the time the employee accepts the assignment
- After 60 days on the market regardless of buyer activity
Correct answer: When the outside buyer makes an offer that the employer matches
In a BVO program, the employer purchases the home only when an outside buyer presents an offer, which can provide tax advantages by avoiding a direct employer-employee sale.
Question 4: Which federal form must employers use to report taxable relocation benefits paid to employees?
- Form 1099-MISC
- Form W-2 (Correct answer)
- Form 1040 Schedule C
- Form 4684
Correct answer: Form W-2
Taxable relocation benefits, including gross-up payments, must be reported on the employee's Form W-2 as wages.
Question 5: A 'gross-up' payment in relocation is designed to:
- Cover the appraiser's fee for the home evaluation
- Compensate the employee for additional taxes owed on taxable relocation benefits (Correct answer)
- Increase the guaranteed buyout offer above appraised value
- Pay closing costs on the employee's new home
Correct answer: Compensate the employee for additional taxes owed on taxable relocation benefits
A gross-up compensates the employee for federal, state, and FICA taxes incurred on taxable relocation reimbursements, making the employee 'whole.'
Question 6: Under the Tax Cuts and Jobs Act of 2017 (TCJA), employer-paid relocation expenses for non-military employees became:
- Fully deductible by the employee on Schedule A
- Excludable if the move met the 50-mile distance test
- Fully taxable as ordinary income to the employee (Correct answer)
- Subject only to capital gains tax rates
Correct answer: Fully taxable as ordinary income to the employee
The TCJA suspended the moving expense deduction and exclusion for non-military taxpayers from 2018 through 2025, making all employer-paid relocation benefits taxable income.
Question 7: When an appraiser determines the 'amended value' in a relocation homesale program, what is the primary basis for that value?
- The employee's original purchase price plus improvements
- An updated appraisal reflecting an outside buyer's negotiated offer (Correct answer)
- The average of two independent appraisals ordered by the employer
- The assessed value as determined by the local tax authority
Correct answer: An updated appraisal reflecting an outside buyer's negotiated offer
The amended value is typically derived from the outside buyer's accepted offer, replacing or supplementing the original appraisal-based offer.
CRPA Tax, Legal, & Financial Considerations 2
Under IRS rules, which relocation expense is generally excludable from an employee's gross income when paid or reimbursed by an employer?