IT
INTERPRETATION BULLETIN
SUBJECT: INCOME TAX ACT
Scholarships, Fellowships, Bursaries, Prizes, and
Research Grants
NO: IT-75R3 DATE: October 4, 1993
REFERENCE: Paragraphs 56(1)(n) and (o) (also section 67; subsections
5(1), 6(3), 9(1), 56(2), 104(13) and 105(1); paragraphs
6(1)(a) and 56(1)(m), 56(1)(q) and 60(q); and subparagraphs
56(1)(a)(iv) and 115(2)(e)(ii)) of the Income Tax Act and
sections 200 and 7700 of the Income Tax Regulations)
Application
This bulletin replaces and cancels Interpretation Bulletin IT-75R2
dated January 30, 1980 and the Special Release dated December 19, 1986.
Summary
This bulletin discusses the taxation of scholarships, bursaries, prizes
and research grants, and the differences between these types of
receipts. Depending on the nature and circumstances of the payment, the
bulletin explains how each should be treated for tax purposes,
including what amounts must be included in income, what amounts may be
excluded and the deductibility of related expenses.
CONTENTS Paragraph
General Overview 1-3
Art Production Grants 4
Scholarships and Bursaries 5-9
Fellowships 10-12
Student Assistantships 13-14
Student Loans 15
Prizes 16-18
Prescribed Prizes 19
Research Grants 20-23
Allowances and Separate Grants 24-25
Reimbursements and Accountable Allowances 26-28
Research Assistants 29
Research Expenses 30-35
Amounts Received from a Trust 36
Residency Issues 37-38
Information Returns and Withholding of Tax 39
Discussion and Interpretation
General Overview
1. Paragraph 56(1)(n) generally includes in income all but the first
$500 of the total of all amounts received in the year as or on
account of a:
(a) scholarship;
(b) fellowship;
(c) bursary; or
(d) prize for achievement in a field of endeavour ordinarily
carried on by the taxpayer (other than a prescribed prize - see
19 below).
Such amounts are included in income in the year received. For each
taxation year, only one $500 exemption is available to be applied
against all income included under paragraph 56(1)(n). Paragraph
56(1)(n) and the $500 exemption noted above do not apply to amounts
received in the course of business (see 18 below) or to amounts
received from an office or employment (see 17 below). Paragraph
56(1)(n) also does not apply to payments received from a registered
education savings plan which are required to be included in income
under paragraph 56(1)(q). Special rules apply in 1987 and later years
to what may be described as "art production grants" (see 4 below).
2. Grants received in a taxation year to enable a taxpayer to carry on
research or any similar work are included in income under paragraph
56(1)(o). However, a taxpayer is only required to include in income
that part of such grants that exceeds the total of any allowable
expenses incurred by the taxpayer in the year for the purpose of
carrying on the work. There is no $500 exemption for research grants
received. For more information about what is considered to be a
research grant, see 20 and 21 below. Allowable research expenses are
discussed in 30 to 35 below.
3. The circumstances of each case must be examined in order to
determine if the assistance is an amount subject to tax as a
scholarship, fellowship, bursary or prize under paragraph 56(1)(n) as
described in 1 above, or if the amount is a research grant taxable
under paragraph 56(1)(o) as outlined in 2 above. Factors relevant to
this determination are discussed throughout the rest of this bulletin.
Art Production Grants
4. Special rules apply in 1987 and later years to what may be
described as "art production grants." Specifically, an exception to the
flat $500 exemption mentioned in 1 above applies to a taxpayer who
receives any amount that is included in income under paragraph 56(1)(n)
if that amount is to be used by the taxpayer in the production of a
literary, dramatic, musical or artistic work. In such cases, when
calculating income under paragraph 56(1)(n), the taxpayer may deduct
whichever of the following amounts is greater:
(a) $500; or
(b) the total amount of reasonable expenses incurred in the year to
fulfil the conditions of receiving all art production grants, but
not exceeding the total amount of such grants included in income
for the year under paragraph 56(1)(n).
(As discussed in 33 below in relation to research expenses,
expenses incurred in the immediately preceding or the immediately
following year may also qualify.)
The amount of reasonable expenses in (b) above cannot include:
(c) personal and living expenses of the taxpayer (other than expenses
of travel, meals and lodging incurred in the course of fulfilling
the conditions of the art grants and while absent from the
taxpayer's usual place of residence for the period to which the art
grants relate),
(d) expenses for which the taxpayer has been reimbursed, and
(e) expenses that are otherwise deductible in computing the taxpayer's
income.
The taxpayer may not claim the travelling expenses of his or her spouse
and children or other third parties.
Scholarships and Bursaries
5. Scholarships and bursaries are amounts paid or benefits given to
students to enable them to pursue their education. Scholarships and
bursaries usually apply to education at a post-secondary level or
beyond, such as at a university, college, technical institute or other
educational institution. However, there are circumstances where
scholarships or bursaries are awarded for education below the
post-secondary school level. Scholarships and bursaries normally assist
the student in proceeding towards a degree, diploma, or other
certificate of graduation. Scholarships and bursaries may apply to any
field of study, including an academic discipline (such as the arts or
sciences), a professional program (such as law or medicine) or a trade
or skill (such as plumbing or carpentry). Normally, a student is not
expected to do specific work for the payer in exchange for a
scholarship or bursary. If a scholarship or bursary program provides
allowances or reimbursements to pay for specific educational costs,
such as those for lodging, personal travel, tools, books or equipment,
those amounts are generally included in income under paragraph 56(1)(n)
(see 26 to 28 below). Paragraph 56(1)(n) can also apply to the value of
benefits in kind, such as free accommodation or equipment.
6. During or immediately after a period of employment, employees and
employers sometimes make agreements under which the employer agrees to
pay all or part of the employee's education costs on the condition that
the employee returns to work for the employer when the education is
completed. In such cases, the amounts so paid are employment income to
the student under subsection 5(1) pursuant to subsection 6(3), and not
scholarship or bursary income within the meaning of paragraph 56(1)(n).
7. If an employer-employee relationship has not yet been established
and a student receives a scholarship or bursary in return for
undertaking to enter the employment of the person granting the award
upon completion of the studies or training, the payments received are
considered to be scholarship income under paragraph 56(1)(n).
8. As a matter of good employee relations, an employer may pay tuition
fees for, or give a grant or award to, one or more school-age or
university-age children of employees. Such a payment is considered to
be a scholarship or bursary. It is income of the child under paragraph
56(1)(n) if the payment is made as part of a plan to help a certain
number of children who are selected on the basis of their scholastic
records or other achievements or qualities. This treatment is
particularly likely if the selection is made by a board or committee or
by persons not connected with the employer, such as schoolteachers. In
other cases, a payment to assist in the education of employees'
children is normally considered to be employment income of the employee
(the parent) by virtue of subsection 56(2) and paragraph 6(1)(a).
9. Paragraph 56(1)(n) does not apply to training allowances paid under
the National Training Act (which are included in income under paragraph
56(1)(m)). Similar training allowances given by other granting
authorities, including provincial student assistance plans, are
considered to be scholarships or bursaries and are subject to paragraph
56(1)(n). However, for 1988 and later years, subparagraph 56(1)(a)(iv)
provides that payments made under the Unemployment Insurance Act which
relate to the cost of a course or program designed to facilitate the
re-entry into the labour force of a claimant under that Act are not
included in an individual's income.
Fellowships
10. Fellowships are similar to scholarships and bursaries in that they
are amounts paid or benefits given to persons to enable them to advance
their education. However, the recipient is generally a graduate student
and the payer is generally a university, charity, or similar body.
Fellowships are generally awarded for doctoral studies and
post-doctoral work. An amount received on account of a fellowship is
normally included in income as a fellowship under paragraph 56(1)(n),
but it can sometimes be included as a research grant under paragraph
56(1)(o). The treatment depends upon the primary purpose for which the
fellowship was granted as determined by reference to the terms and
conditions attached to the award. If the primary purpose of the award
is to further the education and training of the recipient in his or her
individual capacity, such as studying for a doctoral degree, the award
is included in income under paragraph 56(1)(n) (subject to the
applicable exemptions under that paragraph), even though research is
undertaken as a means to achieve that purpose.
11. On the other hand, if the primary purpose of the award is to carry
out research for its own sake (for example, to further knowledge in a
particular field by discovering new facts, or by reinterpreting
existing knowledge), the award is considered to be a research grant and
is included in income under paragraph 56(1)(o). Where the recipient's
education and training is also furthered by such research, such a
benefit does not invalidate the primary purpose of the grant provided
the benefit can be considered to be a secondary purpose of the grant or
an inevitable but incidental benefit. (See 21 below as well as the
decision in The Queen v. Amyot, (1976) C.T.C. 352, 76 DTC 6217 (FCTD).)
12. In some cases an award, such as a leave fellowship, may be partly
for the purpose of research and partly for the recipient's education
and training. If so, it may become difficult to determine the primary
purpose of the award. In such cases, the recipient may not include part
of the fellowship or other award in income under paragraph 56(1)(o) and
another part under paragraph 56(1)(n). In these borderline cases, the
characterization of the amount may be left to the grantor to determine
based on the primary purpose to the grantor. Such a determination must
be reasonable in the circumstances and should be based on the general
guidelines set out in 10 and 11 above.
Student Assistantships
13. As a condition of receiving financial assistance, a student
(usually a graduate student or an upper-year undergraduate) may agree
to do some teaching, marking of examination papers, demonstration of
work, or research as a member of the staff of a university. If part of
the assistance is paid in the form of a fellowship and the remainder as
remuneration for the performance of the duties, those two parts are
treated differently for tax purposes. The amount received as a
fellowship is subject to paragraph 56(1)(n), while the amount received
for services rendered as an employee is considered employment income
under subsection 5(1).
14. If the university has not provided for separate payments of the
fellowship and employment components of the financial assistance, the
whole amount so paid to the student would technically be employment
income under subsection 5(1), since the terms of the agreement require
the student to render service in return for it. However, if this
results in a rate of pay that is considerably in excess of the going
rate for similar services, the student is not required to treat the
whole amount as compensation for these services. In such cases, the
student only needs to include in his or her income from employment the
amount that is equal to what the university would have paid for similar
services rendered by a person not receiving a fellowship or similar
assistance. The remainder of the financial assistance is regarded as a
fellowship and is brought into income by paragraph 56(1)(n), subject to
the provision for a maximum annual exemption of $500.
Student Loans
15. If a student receives a genuine loan to assist in financing the
student's education, the loan is not considered to be an amount
received as or on account of a scholarship, fellowship, or bursary for
purposes of paragraph 56(1)(n). For a genuine loan to exist, provisions
must generally be made for repayment within a reasonable time. In some
cases, a forgivable loan may be included in income. If an amount
included in income under paragraphs 56(1)(n) or (o) is later repaid,
paragraph 60(q) may allow the taxpayer to deduct the repayment. For
more detailed information, see the current version of IT-340,
Scholarships, Fellowships, Bursaries and Research Grants - Forgivable
Loans, Repayable Awards and Repayable Employment Income.
Prizes
16. Paragraph 56(1)(n) includes in income the amount of a prize for
achievement in a field of endeavour ordinarily carried on by the
taxpayer (other than a prescribed prize - see 19 below). A prize can be
considered to be an award to a particular person selected from a group
of potential recipients and given for something that is accomplished,
attained or carried out successfully. However, the type of prize
contemplated in paragraph 56(1)(n) is restricted. The criteria for
awarding the prize must be such that a recipient is rewarded for
success in an area in which the recipient regularly applies effort.
Therefore, an amount generally qualifies as a prize for purposes of
paragraph 56(1)(n) if it is paid in recognition of a genuine
accomplishment in a challenging area, whether it be of an academic,
vocational or technical nature. A prize that is not included in
paragraph 56(1)(n) is considered to be a "windfall" and is not required
to be included in income unless it is also a business receipt (see 18
below) or income from employment (see 17 below). The following points
indicate how paragraph 56(1)(n) applies to certain situations.
(a) An award of damages to an injured party. This is not considered to
be a prize.
(b) Lottery winnings. Although this is a prize, the recipient is not
being recognized for an accomplishment nor are the winnings likely
to relate to a field of endeavour ordinarily carried on by the
recipient. As a result, paragraph 56(1)(n) does not apply. See the
current version of IT-213, Prizes from Lottery Schemes, Pool System
Betting and Giveaway Contests.
(c) An award by a professional institution to the candidate obtaining
highest marks in examinations set by the institution. This is a
prize subject to the provisions of paragraph 56(1)(n).
17. If an employee receives, from his or her employer, a prize or other
award related to sales or other work performance, the fair market value
of such an incentive is regarded as remuneration for services.
Accordingly, this amount must be included in income under subsection
5(1). Similarly, the fair market value of any award not regarded as
remuneration that is received by an employee in respect of, in the
course of, or by virtue of the employee's office or employment is also
included in income from an office or employment under paragraph
6(1)(a). For example, amounts received from an employer for exceeding
sales targets, success in examinations, suggestion awards, and payments
for exceptional service, are not eligible for the $500 exemption
provided under paragraph 56(1)(n). For more information, see the
current version of IT-316, Awards for Employees' Suggestions and
Inventions.
18. If there is no employer-employee relationship between the payer
and the recipient of an amount and it can be established that the
amount is a business receipt, the amount is included in income under
subsection 9(1). However, if the amount received is a prize for
achievement in a field of endeavour ordinarily carried on by the
taxpayer and it cannot be regarded as a business receipt (and is not a
prescribed prize as discussed in 19 below), then the amount is included
in income under paragraph 56(1)(n). The usual $500 exemption applies,
but no expenses are deductible from such an amount, unless they are
eligible expenses relating to an "art production grant" as discussed in
4 above.
Prescribed Prizes
19. A prize meeting all of the criteria of a "prescribed prize" is not
included in computing the income of the recipient, even if the prize
relates to accomplishments in the recipient's ordinary field of
endeavour. Section 7700 of the Regulations defines a prescribed prize
as any prize that is recognized by the general public and that is
awarded in 1983 or later years for meritorious achievement in the arts,
the sciences or service to the public. For example, a Nobel Prize given
to a scientist or the Governor General's Literary Award given to a
professional writer would qualify, as would many community service
awards. Scholarships and bursaries awarded to students would not
qualify. Furthermore, any amount that can reasonably be regarded as
having been received as compensation for services rendered, or to be
rendered, is not a prescribed prize.
Research Grants
20. Grants received in a taxation year to enable a taxpayer to carry on
research or any similar work are included in income under paragraph
56(1)(o). However, such research grants are only included in income to
the extent that they exceed the total of the allowable expenses (see 30
to 35 below) incurred by the taxpayer in the year for the purpose of
carrying on the work. A research grant is generally a sum of money
given to enable the recipient to pay expenses necessary to carry out a
research project. The grant may also include an element of remuneration
to the recipient. It is the nature and terms of the grant, rather than
the name given to it, that determine whether it is included in income
under paragraph 56(1)(n) or (o).
21. For the purposes of paragraph 56(1)(o), "research" involves a
critical or scientific inquiry aimed at the discovery of new facts, or
the development of new interpretations or applications. It does not
include research carried out for the sake of acquiring the experience
or skill of conducting research, as may be the case with research
carried out by undergraduate students. In order for a grant to be
considered a research grant, the terms of the grant must establish that
the primary purpose of the grant is to carry out research (see the
comments in 11 above). The following factors may be helpful in this
context:
(a) If only one of the major purposes of the grant is to enable the
recipient to carry out a research project, this does not in itself
establish the primary purpose. The comments in 12 above should be
referred to in cases where a grant has more than one major purpose.
(b) The term or terms relating to the research requirements for the
grant must be specific. Vague and general references, such as
"including research," do not in themselves bring the grant within
paragraph 56(1)(o).
(c) Generally, awards to undergraduates are included in income under
paragraph 56(1)(n), even though some research for essays, projects,
etc., is required as part of the course requirements.
(d) If the terms of the grant do not mention research, paragraph
56(1)(n) applies, even if a great deal of research is in fact done.
22. A corporation or other entity (such as a university or college) may
decide to give a grant to a person outside its own organization to do
specific research. Where this is done, the grant is considered to be a
research grant to the recipient for purposes of paragraph 56(1)(o)
whether the results of the research belong to the grantor or the
recipient. If the recipient is an employee of the grantor and is
retained on part salary while undertaking a specific research project,
the part salary is included in the recipient's income under subsection
5(1). Any amount received as a research grant (net of allowable
expenses) is included in income under paragraph 56(1)(o). Individuals
(such as university faculty members) whose duties of employment include
research responsibilities are not entitled to treat a portion of their
regular salaries as a research grant when they engage in the type of
research work ordinarily expected of them under their terms of
employment.
23. A research grant is not considered to be "received" at any time for
the purposes of paragraph 56(1)(o) if all of the following
circumstances apply:
(a) funds are made available to an individual who holds an academic
appointment at a university, hospital, or similar institution, to
enable the individual to carry on research or similar work;
(b) the funds are paid directly to the university, hospital, or similar
institution;
(c) the funds are provided only to pay for the costs of the research
project; and
(d) the funds were not used by the individual and were not otherwise
available for the personal benefit of the individual.
In some cases, part of the research grant may be paid to a researcher
or may otherwise be made available for the researcher's personal
benefit, but the remainder of the funds meet the criteria listed above.
If so, only that part of the grant actually paid to, or otherwise
available for the researcher's personal benefit, will be considered to
be "received" by the researcher as a research grant under paragraph
56(1)(o).
Allowances and Separate Grants
24. In this bulletin, "allowance" refers to any periodic or other type
of payment that a student or researcher receives for expenses without
having to account for its use. All amounts received as a scholarship,
fellowship, bursary, prize for achievement or research grant must be
included in computing income. These amounts must be included whether or
not they are received as a fixed sum, as an allowance, or as a fixed
sum plus additional allowances. The comments in 10, 11 and 21 above,
which deal with whether or not a grant should be taxed under paragraph
56(1)(n) or (o), also apply to allowances.
25. Each allowance and grant should be considered separately when
determining if it is subject to paragraph 56(1)(n) or (o). Therefore,
it is possible for a graduate student to have an award which is taxable
under paragraph 56(1)(n) and a subsidiary allowance or separate grant
(either from the same, or a different grantor) which is taxable under
paragraph 56(1)(o). Reimbursements and Accountable Advances 26. The
terms "reimbursement" and "accountable advance" are used in this
bulletin with the following meanings.
(a) "Reimbursement" refers to payments to students or researchers to
repay them for amounts they spent in continuing their education or
in carrying out research work.
(b) "Accountable advance" refers to amounts given to students or
researchers for expenses to be incurred by them in continuing their
education or to carry out research work. These amounts must be
accounted for by providing vouchers. Any amount not expended for
its intended purpose must be returned.
27. Reimbursements or accountable advances to cover expenses incurred
by students in furthering their education are subject to paragraph
56(1)(n). For example, students who receive scholarships to enable them
to attend universities located at some distance from their homes may
also receive reimbursements or accountable advances to cover travelling
expenses between their homes and the university. This type of
reimbursement or accountable advance is included in computing income
under paragraph 56(1)(n), subject to applicable exemptions under that
paragraph.
28. A reimbursement or accountable advance to pay for the reasonable
costs of a research project is only included in computing income to the
extent that the expenses reimbursed represent personal or living
expenses of the recipient (except allowable travelling expenses as
outlined in 30 to 35 below). Expenses for which the recipient has
received a reimbursement or accountable advance and which are not
included in computing income are not deductible as allowable expenses
under paragraph 56(1)(o). Research Assistants
29. In some cases, a researcher may hire one or more assistants whose
relationship to the researcher may be that of:
(a) co-researcher to the researcher;
(b) employee to an employer; or
(c) student to a professor.
If the relationship is that of co-researcher to the researcher,
payments made out of a research grant to the co-researcher are regarded
as a research grant for purposes of paragraph 56(1)(o). If the
relationship is that of employee to an employer, payments made to the
assistant are regarded as employment income taxable under subsection
5(1). In cases where the relationship of the assistant to the
researcher is that of student to a professor, the student receiving
payment for his or her share in the project may have undertaken the
work not primarily for financial gain but because participation in it
will assist the student in qualifying for a degree or other scholastic
recognition in the field in which the research is being carried on. In
this situation, the direction given by the researcher is usually of a
general or consultative nature, and the student-assistant will have
more freedom in carrying on his or her part of the project than an
assistant would under an employee-employer relationship. If this is the
case, payments made out of a research grant to the assistant are
regarded as a research grant. On the other hand, duties and tasks may
be required that do not have to be performed by a student participating
in the research to further his or her own education. Certain types of
clerical or laboratory work, for example, may require some degree of
skill, but if that work is performed by the student assistant under the
specific direction of a researcher or co-researcher and it is done
primarily for financial gain, an employee-employer relationship is
considered to exist. If so, payments received by the student assistant
out of the grant are employment income included under subsection 5(1).
Research Expenses
30. Research grants only need to be included in income to the extent
that the grants exceed allowable expenses incurred by the taxpayer in
the year for the purpose of carrying on the work. The research expenses
allowable under paragraph 56(1)(o) may not exceed the total research
grants taxable in the year under that paragraph. In other words,
research expenses cannot be applied to reduce other types of income
such as scholarships, employment income or business income. By virtue
of section 67, research expenses are also not deductible to the extent
that they exceed an amount that is reasonable in the circumstances.
31. In this context, allowable research expenses do not include:
(a) personal and living expenses of the taxpayer (other than travelling
expenses incurred by the taxpayer while away from home in the
course of carrying on the work, including amounts spent for meals
and lodging - see 32 below);
(b) expenses for which the taxpayer has been reimbursed, (except to the
extent that these reimbursements are included in income as part of
a grant received); and
(c) expenses that are otherwise deductible in computing the taxpayer's
income.
32. Travelling expenses (including all amounts spent for transportation
and lodging while travelling) that the taxpayer incurs while away from
home in the course of carrying on the work are allowable research
expenses. If, while engaged in the research work, a taxpayer
establishes a temporary base in a place other than his or her home, the
taxpayer may be considered to be temporarily residing in that place
(sojourning) rather than travelling. This is a question of fact in each
case which depends on factors such as the type of accommodation, the
length of stay, the existence of a permanent home elsewhere and the
location of the taxpayer's family. If a taxpayer is temporarily
residing in a place, amounts paid for meals and lodging in that place
are considered to be personal and living expenses rather than
travelling expenses. As such, they are not allowable research expenses.
A person in receipt of a research grant is entitled to claim his or her
own expenses for:
(a) travel between his or her home and the place where he or she
temporarily resides while engaged in the research work;
(b) travel from one temporary location to another; and
(c) travel on field trips connected with the work.
The taxpayer may not claim the travelling expenses of his or her spouse
and children or other third parties (see Subbarao v. MNR, (1986) 2
C.T.C. 2089, 86 DTC 1554 (TCC)).
33. Paragraph 56(1)(o) provides that, in order for research expenses to
be deductible from the grant, the research expenses must be incurred in
the same year in which the research grant is received. In some cases,
research expenses may be incurred in the year immediately before or
immediately after the year in which the grant is received. While those
expenses cannot be deducted in the year in which they are incurred,
they are considered to be deductible in the year in which the grant is
received. However, for any expenses incurred in the year before the
grant is received, those expenses incurred before the taxpayer is
notified that the grant will be paid are not deductible from that
grant. Research expenses incurred more than one year before, or more
than one year after, the year in which the grant is received are not
deductible from that grant.
34. The term "expenses" as used in paragraph 56(1)(o) is interpreted to
include not only current expenses but also expenditures of a capital
nature.
35. If research expenses are paid by the university, hospital or
similar institution on behalf of a researcher in the circumstances
outlined in 23 above, those expenses are not regarded as having been
incurred by the researcher.
Amounts Received from a Trust
36. When a trust (including a trust which is a registered charity) pays
a scholarship, fellowship, bursary, prize or research grant, that
amount must be included in the income of the recipient under paragraph
56(1)(n) or (o), rather than as income from a trust under subsection
104(13) or 105(1). The recipient may therefore claim the $500 exemption
under paragraph 56(1)(n) or the expenses allowed under paragraph
56(1)(o), as the case may be.
Individuals from Other Countries Who Become Resident of Canada
37. Individuals from other countries who become residents or deemed
residents of Canada for the purposes of their education or training are
subject to tax in Canada on their world income from that time. This
income would include both Canadian and foreign source awards they
receive. However, awards received from foreign sources by such
individuals resident in Canada may be exempt from income tax in Canada
by virtue of an income tax agreement between Canada and the country in
which the individual previously resided. For example, Article XX of the
Canada-United States Income Tax Convention (1980) provides an exemption
from tax in Canada for amounts that American students receive from
within the United States for their maintenance or studies in Canada.
Non-Residents of Canada
38. Subsection 115(2) provides special rules pertaining to certain
non-resident individuals. The main categories affected are:
(a) students;
(b) teachers;
(c) persons carrying on research; and
(d) individuals who previously were Canadian residents;
who are in receipt of remuneration from an office or employment or
Canadian source scholarships, fellowships, bursaries, prizes, and
research grants. In accordance with subparagraph 115(2)(e)(ii), a
non-resident individual subject to the rules of subsection 115(2) is
taxable on all amounts received from a source in Canada that would be
required by paragraphs 56(1)(n) and (o) to be included in computing
income for the year if the individual were resident in Canada
throughout the year.
Information Returns and Withholding of Tax
39. Tax does not have to be withheld at source from amounts that are
included in the recipient's income under either of paragraphs 56(1)(n)
or (o). However, under subsection 200(2) of the Regulations, every
payer of a research grant, scholarship, fellowship, bursary or prize
(other than a prescribed prize) must report the amount on an
information return (T4A slip).
If you have any comments regarding the matters discussed in this
bulletin, please send them to:
Director, Technical Publications Division
Legislative and Intergovernmental Affairs Branch
Revenue Canada - Customs, Excise and Taxation
875 Heron Road
Ottawa, Ontario
K1A 0L8
Explanation of Changes for Interpretation Bulletin IT-75R3:
Scholarships, Fellowships, Bursaries, and Research Grants
Introduction
The purpose of the Explanation of Changes is to give the reasons for
the revisions to an interpretation bulletin. It outlines revisions that
we have made as a result of changes to the law, as well as changes
reflecting new or revised departmental interpretations.
Overview
This bulletin updates existing IT-75R2 and its December 19, 1986
Special Release, which explains how scholarships, bursaries, prizes and
research grants are taxed, how certain related expenses are deducted,
and the differences between the types of receipts. We revised the
bulletin to incorporate changes to paragraph 56(1)(n), which deals with
expenses to produce artwork, which were enacted in S.C. 1991, c. 49
(formerly Bill C-18).
The bulletin also discusses tax-exempt prescribed prizes, which were
introduced in S.C. 1987, c. 46 (formerly Bill C-64). We have made
general revisions to improve the readability of the bulletin and to
reflect recent departmental opinions on this subject.
This bulletin is not affected by the amendments contained in S.C. 1993,
c. 24 (formerly Bill C-92), which received Royal Assent on
June 10, 1993, or by the draft Amendments to the Income Tax Act and
Regulations, issued by the Minister of Finance on December 21, 1992.
Legislative and other changes
New #s 1, 2 and 3 provide an overview and introduction to the bulletin
and are largely adapted from former #s 1 and 2.
New # 4 explains the amendment to paragraph 56(1)(n) in Bill C-18 to
allow expenses to be claimed against grant income received by artists
in the form of what are here termed "art production grants." The long
standing administrative position in # 33 of the revised bulletin, which
allows the deduction of research expenses incurred in the immediately
preceding or the immediately following taxation year, has been extended
to this substantially similar context. Similarly, the bulletin advises
that travelling expenses of the artist's family or other third parties
are not allowable, which again extends an existing position (see new #
32) on research expenses to this similar context.
New #s 5 to 9 simply clarify the commentary in former #s 3 to 7 on
scholarships and bursaries. # 5 now uses more appropriate examples of
educational fields, and advises that specific allowances and benefits
in kind may be income under paragraph 56(1)(n). # 9 reflects the
addition of subparagraph 56(1)(a)(iv) by Bill C-18, which excludes from
income certain training costs provided under the Unemployment Insurance
Act.
New #s 10 to 12 are largely unchanged from former #s 8 to 10 on the
subject of fellowships. In # 11, we have rephrased the interpretation
of the word "research", and added a citation for the Amyot decision to
support the Department's position on research in relation to the
recipient's education and training.
New #s 13 and 14 on graduate student assistantships are substantially
unchanged from former #s 11 and 12.
In new # 15, we have extended the comments in former # 13 on student
loans to indicate what is meant by a bona fide (or genuine) loan, and
added a brief comment on forgivable loans along with a cross reference
to the current version of IT-340.
New #s 16 to 18 on prizes are largely unaltered from former #s 14 to 16
(we revised #s 15 and 16 in the 1986 Special Release to IT-75R2), but
have changed their order, and deleted some obsolete references.
New # 19 reflects the amendment to paragraph 56(1)(n), contained in
Bill C-64, to exclude from the application of paragraph 56(1)(n),
certain prizes prescribed in section 7700 of the Regulations, which was
added by P.C. 1989-1923, SOR/89-473.
New #s 20 to 23 carry forward the comments on research grants in former
#s 17 to 20. We have rephrased the description of the word "research"
in # 21 to conform more closely with its current ordinary meaning.
New #s 24 to 29 are virtually unchanged from the comments in former #s
21 to 26 on allowances and separate grants, reimbursements and
accountable advances, and research assistants.
New #s 30 to 35 correspond closely to the comments on research expenses
in former #s 27 to 32. # 32 now contains further details on the meaning
of "temporarily residing", and cites the Subbarao case to support the
denial of travelling expenses of the taxpayer's family or other third
parties.
New #s 36 to 38 are essentially unchanged from former #s 33 to 35 on
certain trust and non-resident aspects.
We have added a new # 39 to advise that there is no requirement for
withholding tax at source on the amounts outlined in the bulletin, but
that there is a T4A reporting requirement.
Last updated on 1993-10-04.
This document is also available in the following formats:
i75r3et.exe: self extracting DOS archive i75r3et.tar.Z: compressed tar archive
and the individual constituent parts:
i75r3e.txt: ascii text i75r3e.txt.asc: ascii text i75r3e.txt.html: HTML readme.txt: ascii text
Last updated on 1996-03-25 by webmaster@revcan.ca.
Copyright © 1995, 1996 Minister of National Revenue