9 September 2003 Internal T.I. 2003-0016697 - POST-TRAINING ASSISTANCE

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 ISSUE:

Taxability of amount paid on completion of training program.

Position TAKEN:

General comments. May be taxable pursuant to paragraph 56(1)(n) or 56(1)(r).

Reasons:

Insufficient information.

XXXXXXXXXX 	T. Young, CA
		2003-001669
September 9, 2003

Dear XXXXXXXXXX:

Re: New Beginnings

We are writing in response to your letter of April 30, 2003, to XXXXXXXXXX Tax Services Office, which was forwarded to us for reply. We also acknowledge our various conversations (Young/XXXXXXXXXX) and the receipt of additional information dated June 23, 24 and 25, 2003.

Under the proposed program, XXXXXXXXXX will offer a training program to individuals (the "Participants"), who are currently receiving social assistance. The program will consist of various courses providing training in computer skills and various life skills. The program will also include a period of internship, volunteer work and a XXXXXXXXXX-month review. Upon completion of the program, each Participant will receive a stipend of $XXXXXXXXXX. You have asked us if the stipend will be taxable.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Further, as the information you have provided to us is very general, we are unable to give a definitive answer. However, we are prepared to provide the following comments, which may be of assistance to you.

Scholarships and Bursaries

In general terms, except where an amount is received in respect of the taxpayer's employment, paragraph 56(1)(n) of the Income Tax Act (the "Act") requires the inclusion into income of certain scholarships, bursaries and fellowships, with a maximum exemption of $500. If the amount (other than an artist's project grant amount) is received for a program for which the taxpayer can claim the education amount, the maximum exemption increases to $3,000. A bursary is defined in Webster's Third International Dictionary as "a sum or varying amount given or granted to a needy student". In our view, the definition of a bursary encompasses financial assistance paid to students to enable them to pursue their education, including payments based on the means or needs of the student. As stated in paragraph 8 of interpretation bulletin IT-75R4, Scholarships and Bursaries, paragraph 56(1)(n) can also apply to payments made upon completion of the individual's training or studies. Accordingly, the stipend may be taxable pursuant to paragraph 56(1)(n) of the Act.

Wage Subsidies and Incentives

On the other hand, depending on the agreement between XXXXXXXXXX and each Participant and on the funding arrangement, the stipend may be taxable as a wage subsidy pursuant to subparagraph 56(1)(r)(i) of the Act, rather than as a bursary as noted above. Subparagraph 56(1)(r)(i) of the Act provides for the inclusion in income of amounts received by a taxpayer in the year as earnings supplements provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment. Based on the limited information provided to us, we are unable to determine whether XXXXXXXXXX has undertaken a project sponsored by a government in Canada or whether the financial incentive can be considered an earnings supplement.

As stated in paragraph 47 of IT-75R4, 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 a T4A Statement of Pension, Retirement, Annuity and Other Income. Every payer of an amount that is required by paragraph 56(1)(r) to be included in computing a taxpayer's income must report the amount on either a T4A or a T4E Statement of Employment Insurance and Other Benefits.

You can find the publications referred to above on our web site at www.ccra.gc.ca.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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