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A friend relocated and is concerned about how her employer handled the expenses.

The expenses included costs of selling her old home, interest reimbursements, cost to move household goods, and temporary living expenses. The employer included the amounts of these payments in her W-2 as income, even though most were paid by the company or by a relocation company. They did gross up those amounts for the taxes, but say she cannot deduct any of it except the interest.

1. I thought the point of using a relocation company was to avoid the tax consequences. Are the closing costs paid by her employer to the relocation company (and by the relocation company to the real estate agent, etc.) really taxable income? The relo company owned the house at the time it sold - they closed with her 2 days before the closing with the buyer.

2. Shouldn't the moving expenses be deductible on 3903?

3. Can temp living expenses be deducted on 3903?

4. If the employer has done it incorrectly and won't fix it, what should she do?

5. Any other advice or comment is most welcome.

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