8 September 2000 External T.I. 2000-0022005 - STUDENT EXCHANGE PROGRAM

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Taxpayer's son went to school in Spain to learn Spanish and a student from Spain lived with the taxpayer to learn English. What are the tax consequences of the associated income and expenses?

Position TAKEN:

Insufficient information provided. In general, the expenses are non-deductible (paragraph 18(1)(h)).

Reasons:

Personal expenses.

XXXXXXXXXX 2000-002200
T. Young
September 12, 2000

Dear XXXXXXXXXX:

Re: Student Exchange Program

This is in reply to your letter of April 20, 2000, requesting our opinion on whether the income and expenses incurred in a student exchange program are taxable or deductible for income tax purposes. In your letter, you state that your son went to school in Spain to learn Spanish. In return a Spanish student lived with you while learning English.

In general, expenses such as board and lodging and travel incurred by you with respect to either your son attending school in Spain or a non-resident student attending school in Canada and temporarily staying at your residence are personal expenses and are not deductible for income tax purposes. However, even though it is likely that your enquiry relates to a student exchange program between high school students, we have provided some general information regarding tuition fees and moving expenses in the event your son is a university student.

In order for tuition fees to be eligible for the tuition tax credit, for example, in the event your son incurred tuition fees to attend school in Spain, such fees must meet the conditions of paragraph 118.5(1)(b) of the Income Tax Act (the "Act"). In other words, your son would, among other criteria, have to be a student in full-time attendance at a university outside Canada in a course leading to a degree. The rules are explained in more detail in paragraphs 5 to 7 of Interpretation Bulletin IT-516R2, Tuition Tax Credit (copy enclosed).

The rules for deducting moving expenses to attend a university outside Canada are similar to those for claiming the tuition tax credit. In other words, for your son to be able to deduct any expenses relating to a move to Spain, he would have to, among other criteria, be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution.

His deduction would generally be limited to the scholarships, fellowships, bursaries, prizes and research grants he received as described in paragraphs 56(1)(n) and (o) of the Act. The rules for determining if a student is eligible to deduct moving expenses to attend school are discussed in paragraphs 5 to 11 of Interpretation Bulletin IT-178R3 (Consolidated), Moving Expenses (copy enclosed).

We have not been provided with any information regarding possible income receipts. However, your son's income could include any scholarships, fellowships, bursaries or prizes he received. We have enclosed Interpretation Bulletin IT-75R3, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants, for your assistance. Please note that the 2000 Federal Budget proposed increasing the exempt portion of scholarships, fellowships and bursaries by $2,500 to $3,000 beginning with the year 2000. Individuals are only eligible for the increased exemption if they are eligible to claim the Education Tax Credit under section 118.6 of the Act. For more information on the Education Tax Credit, we have enclosed Interpretation Bulletin IT-515R2, Education Tax Credit.

More information would be required in order to determine if income received or expenses incurred by you or your son are taxable or deductible to either of you. Your local Tax Services Office can assist you in making that determination.

We trust our comments will be of assistance to you.

Yours truly,

J. Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate

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