11 April 2003 External T.I. 2002-0138135 - TUITION FLYING SCHOOL

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 CCRA.

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

Principal Issues:

Review of position on tuition tax credit for flying school in the case (a) solo flying hours and (b) dual flying hours.

Position: No change regarding solo hours and clarification regarding dual hours.

Reasons: Position is correct.

									2002-013813
XXXXXXXXXX 								B.G, Dodd
(613) 957-8953
April 11, 2003

Dear XXXXXXXXXX:

Re: Tuition Fees - Pilot Licence

We are writing in reply to your letter concerning the tuition fee tax credit in the case of the cost of flight instruction associated with acquiring a Commercial Pilot Licence. We apologize for the delay.

It is our understanding that your concern is with the hours of flying time which may be recognized for purposes of the tuition tax credit. More particularly, you are concerned that Transport Canada requires 200 hours to qualify as a commercial pilot but that not all of these hours are recognized for purposes of the tax credit. You are also concerned that the related testing and licencing fees are not eligible.

Subsection 118.5(1) of the Income Tax Act provides a tax credit based on the fees for an individual's tuition paid in respect of the year to an eligible educational institution at which the student was enrolled. Flying training schools or clubs must be certified by the Minister of Human Resources Development to qualify as an eligible educational institution. Tuition fees paid to such schools or clubs qualify only where the student is taking flying lessons in order to become a commercial pilot or a professional instructor.

As discussed in paragraph 29 of Interpretation Bulletin IT-516R2, fees are eligible only to the extent that they may be regarded as having been paid for "tuition". Tuition, as defined in the Concise Oxford Dictionary for example, means "teaching, instruction, especially as a thing to be paid for; a fee for this". In the case of students enrolled at qualifying flying training schools or clubs for purposes of becoming commercial pilots or professional instructors, there are a number of aspects which may be involved for which costs are incurred, some of which entail teaching or instruction and, therefore, may be regarded as tuition, and others which do not involve teaching or instruction, and, therefore, would not be regarded as tuition.

In first obtaining the requisite Private Pilot Licence, our understanding of current Transport Canada requirements (for airplanes) is that an applicant must complete a minimum of 40 hours ground school instruction in a number of areas. In addition, there is a requirement for a minimum of 45 hours flight training under direction and supervision, which includes both dual and solo flight time. As this flight training involves teaching or instruction, we recognize that the associated costs, up to the 45 hour requirement, qualify as tuition.

In the case of a Commercial Pilot Licence, an applicant who holds a Private Pilot Licence is required to complete 65 hours of commercial pilot flight training, which includes both dual and solo flight time. As this flight training involves teaching or instruction, we also recognize the cost, up to the 65 hour requirement, as tuition.

Requirements for a Commercial Pilot Licence also include an overall minimum 200 hours of flight time (of which a minimum of 100 hours must be pilot-in-command time). While an aggregate of at least 110 hours of flight time will be derived through meeting the combined flight training requirements for a Private Pilot Licence and a Commercial Pilot Licence, it is our understanding that the balance needed to meet the 200 hour flying experience requirement need not involve instruction and direct supervision and will largely consist of solo flying. In our view, costs incurred by a student in flying an aircraft to gain experience or to practice that which has been learned under instruction are not tuition and do not qualify for the credit. (Our position in this matter was confirmed in the Tax Court of Canada decision of D. Hyndman v. the Queen, 1996 [2] CTC 2344.) Moreover, such costs may essentially be for equipment rental as distinct from fees paid for teaching or instruction and, therefore, cannot be construed as tuition. We would also note, as described in IT-516R2, that costs incurred by a student in flying personal aircraft while taking a course at a flying training school or club are not eligible.

Accordingly, the CCRA recognizes that the cost of solo flying under direction and supervision, to the extent included in the flight training requirements of 45 and 65 hours for a Private Pilot Licence and Commercial Pilot Licence respectively, qualifies as tuition but that the cost of solo flying hours beyond these flight training requirements does not. Where a student pilot requires additional dual hours beyond the flight training requirements of 45 and 65 hours for a Private Pilot Licence and Commercial Pilot Licence respectively, the cost of such dual hours may qualify as tuition provided that with respect to such dual flying, the student is enrolled in a flight training program at a qualified school, is accompanied by the instructor, and is, in fact, under instruction and direct supervision.

With respect to testing or examination fees, as discussed above, only those fees which qualify as tuition are eligible. It is our view that to be considered tuition, the examination and the related fees would have to form an integral part of a course of study. Where a student is required to pay an examination fee that is not an integral part of a course of study (for example, where the examination is through Transport Canada rather than the qualifying flying training school or club which provides the course), such fee would not qualify.

We hope this will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate