9 September 2005 External T.I. 2005-0118921E5 - Sabbatical Leave Research Grant

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: 1) Where an employee travels between his/her residence and the University during a sabbatical leave for the purpose of supervising graduate students are the travel and other subsistence expenses allowable research expenses?

2) Are there guidelines to determine the reasonability of amounts paid to an employee while on sabbatical leave?

3) Where a computer is purchased before the beginning of a sabbatical leave can the purchase of the computer be considered an allowable research expense?

4) What is the current definition of sojourning? Is the employee sojourning where an employee remains in one place for more than 30 days?

Position: 1) Personal or living expense for travel between residence and university. Allowable research expenses if incurred away from home while carrying on the work.

2) Amounts will be considered reasonable if designed to cover the out-of-pocket costs that the employee will incur for the expense.

3) Purchases made for a research project in the year but prior to the receipt of the research grant will be considered allowable research expenses if the expense is not otherwise deductible in computing the researcher's income for the year.

4) Sojourning is not defined in the ITA but means temporarily residing in a place. The determination is dependent on a number of factors. More than 30 days in one place will likely be considered sojourning.

Reasons: 5(1), 56(1)(o) and IT-75R4

2005-011892
XXXXXXXXXX Luisa A. Majerus, CA
(613) 832-3488
September 9, 2005

Dear XXXXXXXXXX:

Re: Sabbatical Leave Research Grant

This is in reply to your letter dated February 23, 2005, requesting information relating to the above-noted subject matter. You provide assistance and advice to Faculty members ("employees") regarding the tax implications of amounts received during their sabbatical leave.

Specifically, you have asked the following questions:

1) Where an employee travels between his/her residence and the University during his/her sabbatical leave for the purpose of supervising graduate students are the travel and other subsistence expenses allowable research expenses.

2) Are there guidelines to determine the reasonability of amounts (meals, accommodation, airfare) paid to an employee while on sabbatical leave?

3) Where a computer is purchased before the beginning of a sabbatical leave can the purchase of the computer be considered an allowable research expense?

4) What is the current definition of sojourning? Is the employee sojourning where an employee remains in one place for more than 30 days?

Generally, the salary, wages and other remuneration, including gratuities, received by a taxpayer in a taxation year will be included in the taxpayer's income from an office or employment by virtue of subsection 5(1) of the Income Tax Act (the "Act"). Where a taxpayer receives a grant in the year to enable the taxpayer to carry on research or any similar work, the amount of the grant received, in excess of the total allowable research expenses incurred by the taxpayer in the year for the purpose of carrying on the work, is included in a taxpayer's income under paragraph 56(1)(o) of the Act. For further information on research grants please refer to our Interpretation Bulletin IT-75R4 - Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance which can be found on our website at www.cra-arc.gc.ca.

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 (except to the extent that these reimbursements are included in income as part of the grant received); and
? expenses that are otherwise deductible in computing the taxpayer's income.

Where an employee travels between his/her residence and the University for the purpose of supervising graduate students, the travel between his/her residence and the University will be considered a personal or living expense. However, other travel expenses will be allowable research expenses if the employee incurs the expense while away from home in the course of carrying on the work. Amounts paid to the employee to carry on the work will be considered reasonable if designed to cover the out-of-pocket costs that the employee will incur for the expense.

In response to your third question and as noted in paragraph 34 of IT-75R4, in order for research expenses to be deductible from the grant, the research expenses must be incurred in the same year in which the research grant is received and must not otherwise be deductible in computing income for the year. For expenses incurred in the year before the grant is received, those expenses incurred before the taxpayer is notified that the grant will be paid are not deductible from that grant. Accordingly, purchases made for a research project in the year but prior to the receipt of the research grant will be considered allowable research expenses if the expense is not otherwise deductible in computing the researcher's income for the year.

Finally, the determination of whether an employee is sojourning is a question of fact in each case that depends on factors such as the type of accommodation, the length of stay, the existence of a permanent home elsewhere and the location of the employee's family. Where the employee is sojourning or temporarily residing in a place, amounts paid for meals and lodging in that place are considered to be personal and living expenses and are not allowable research expenses. It is our view that expenses incurred for overnight accommodations will likely qualify as allowable research expenses; however the employee will likely be considered to be sojourning where he resides in a place for more than 30 days.

We trust this information meets your needs at the current time.

Yours truly,

Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch