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 Manitoba Bursary and Canada Millennium Scholarship Bursary fall within the meaning of bursary as contemplated under paragraph 56(1)(n).
Position: Yes.
Reasons: ITA
2005-011441
XXXXXXXXXX Rob Ferrari
(613) 957-2138
May 30, 2005
Dear XXXXXXXXXX:
Re: Manitoba Bursary and Canada Millennium Scholarship Bursary Programs - Paragraph 56(1)(n)
This letter is in response to your e-mail to us on February 3, 2005. You requested our opinion as to whether awards paid to Canadian residents under the Manitoba Bursary program (the "MB program") and the Canada Millennium Scholarship program (the "CMSB program") fall within the meaning of bursary as contemplated under paragraph 56(1)(n) of the Income Tax Act (the "Act").
Facts:
Manitoba Student Loans and Canada Student Loans are subsidized loans that are interest free while a student attends school and do not become payable for six months after the student completes their full-time studies. Manitoba Student Aid administers the MB program and the CMSB program, which are designed to reduce student loan debt for eligible students and are made available to students with the highest assessed needs and debt level. Usually, the bursaries are paid directly against the student's loan. In the limited cases where the student does not have a student loan outstanding, the awards are paid directly to the student. The awards are not repayable by the student, unless, the student fails to fulfill certain conditions, such as completing the study period or failing to provide an accurate representation of income.
Your View:
In your opinion, amounts received from each of the MB program and the CMSB program are taxable income to the recipients pursuant to paragraph 56(1)(n) of the Act.
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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002.
The determination of the income tax treatment of payments such as those described in this letter involves a question of fact that can only be determined after reviewing all of the relevant documentation and agreements related to the MB program and the CMSB program. However, based on the limited information provided to us, we are prepared to offer the following general comments, which may be of assistance.
Paragraph 56(1)(n) of the Act provides for the inclusion in a taxpayer's income for a taxation year certain scholarships, fellowships, bursaries and prizes for achievement, to the extent that the total of such amounts received in the year exceeds what we will call the scholarship exemption amount, computed under subsection 56(3) of the Act. In this regard, reference is made to paragraph 43 of Interpretation Bulletin IT-75R4 Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance, which states in part:
Under subsection 56(3) the scholarship exemption represents the greater of:
? $500; or
? $3,000 when the amounts included under subparagraph 56(1)(n)(i) are in respect of a scholarship, fellowship or bursary received in connection with the taxpayer's enrolment in an educational program for which he or she may claim an education tax credit for the year...
Paragraph 6 of IT-75R4 describes scholarships and bursaries as follows:
6. 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.... 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 under subparagraph 56(1)(n)(i) (see paragraphs 27 to 29). Subparagraph 56(1)(n)(i) can also apply to the value of benefits in kind, such as free accommodation or equipment. (Emphasis added)
Accordingly, in our view, bursary amounts under the MB program CMSB program that are paid against the students' loans represent benefits given to the students to enable them to pursue their education and fall within the meaning of bursaries as contemplated under paragraph 56(1)(n) of the Act. This view is consistent with the definition of bursary that was adopted by the Court in the Federal Court of Appeal decision in Simser v The Queen, 2005 DTC 5001.
Interpretation Bulletin IT-340R-Scholarships, Fellowships, Bursaries, and Research Grants - Forgivable Loans, Repayable Awards and Repayable Employment Income indicates a particular award that may become repayable if the recipient does not meet certain conditions represents a bursary and is taxable income under paragraph 56(1)(n) of the Act.
2.(b) a "repayable award" is a scholarship, fellowship, bursary or research grant which the recipient is committed to return if certain conditions are not met.
3. If the agreement under which an amount is paid gives rise at the time of payment to an enforceable debt, it is the Department's view that the amount is a loan. If the agreement specifies that the amount paid does not become a debt of the recipient unless the recipient fails to fulfil certain conditions, the amount is generally considered to be a repayable award.
8. Repayable awards are included in computing the recipient's income in the year received under paragraph 56(1)(n) or (o). (Emphasis added)
The fact that a bursary may be required to be repaid if the student does not complete the program would not change the taxable nature of the awards as bursaries. If subsequent to the payment of the bursary, a condition arises in which all, or a portion, of the award has to be repaid in a future year, the repayment may be deductible, in certain circumstances, under paragraph 60(q) of the Act (Refer to paragraph 10 of IT-340R and paragraph 2 of IT-340(SR)).
We hope the above will be of assistance to you.
Yours truly,
Allan Nelson, CMA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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