Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether the funds received as a Postdoctoral Fellow should be reported as a fellowship or a research grant.
Position: Yes. It is a question of fact to be determined upon a review of the circumstances.
Reasons: The taxpayer's duties under your contract with the University is to work on research for XXXXXXXXXX and accordingly it is our opinion that the funds received should be reported as a research grant.
2005-012762
XXXXXXXXXX Charles Rafuse
613-957-8967
June 27, 2005
Dear XXXXXXXXXX:
Re: Research Grant
This is in reply to your email of April 27, 2005, regarding your position of a Postdoctoral Fellow with the XXXXXXXXXX.
Specifically, you have requested as opinion on the tax status of the funds that you will receive and on the eligible deductions that you can claim. Your contract with the University of XXXXXXXXXX indicates that you will be paid $XXXXXXXXXX for the period from XXXXXXXXXX to XXXXXXXXXX related to your duties with a study funded under a research contribution agreement with the XXXXXXXXXX. The study's major objective is to XXXXXXXXXX.
Paragraph 11 of IT-75R4 - Scholarships, Fellowships, Bursaries, Prizes, and Research Grants explains that an amount received on account of a fellowship is normally included as a fellowship under subparagraph 56(1)(n)(i), 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 under subparagraph 56(1)(n)(i), even though research is undertaken as a means to achieve that purpose. 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 under paragraph 56(1)(o). Since your duties under your contract with the University of XXXXXXXXXX is to work on research related to a study funded by XXXXXXXXXX, it is our opinion that the $XXXXXXXXXX that you will receive should be reported as a research grant.
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. In addition, research expenses allowable may not exceed the total research grants taxable in the year. As explained in paragraphs 31 to 36 of IT-75R4 allowable research expenses do not include 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), expenses for which the taxpayer has been reimbursed, and expenses that are otherwise deductible in computing the taxpayer's income. 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.
The scholarship exemption referred to in paragraphs 1 and 2 of IT-75R4 exempts the first $500 and in certain conditions (where the scholarships, fellowships and bursaries are received in connection with a taxpayer's enrolment in a program for which he or she may claim the education tax credit) up to $3,000 of amounts that are included under paragraph 56(1)(n). Since it is our opinion that the $XXXXXXXXXX that you will receive from your position as a Postdoctoral Fellow should be included in your income under paragraph 56(1)(o), you will not be entitled to this exemption.
We trust this information is helpful.
Yours truly,
Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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