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) Can a scholarship exemption be obtained where employment ends, and the employee receives an amount from their employer termed a "retraining allowance", which is paid directly to a school outside Canada for a one-month ESL teacher training course? 2) What other, if any, deductions or tax credits are available?
Position: 1) No 2) The tuition tax credit and education tax credit are not available in this particular situation.
Reasons: 1) 56(1)(n) of the Income Tax Act excludes as scholarships, bursaries etc, amounts received in the course of business, or amounts received in respect of or in the course of, or by virtue of an office or employment and therefore, are ineligible for the taxpayer's scholarship exemption for the year computed under subsection 56(3). 2) Course taken outside Canada does not meet 13-week length requirement to be eligible for tuition and education tax credits.
2005-013678
XXXXXXXXXX Darlene Green
(613) 957-2082
October 17, 2005
Dear XXXXXXXXXX:
Re: Scholarship Exemption
This is in response to your e-mail correspondence of June 14, 2005 wherein you asked whether you are entitled to a scholarship deduction for the 2001 taxation year in respect of an amount you received as a "retraining allowance" at the end of your employment, where the amount was paid by your employer directly to a school in Spain as tuition for you to attend a one-month ESL teacher training course.
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 dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency with respect to your particular situation.
In general terms, amounts or benefits received by an employee arising out of or in consequence of the cessation of employment are considered income from that employment. As described in Interpretation Bulletin IT-75R4, Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance, amounts received in respect of or in the course of, or by virtue of an office or employment are ineligible for a scholarship exemption under subsection 56(3) of the Income Tax Act.
In certain situations, a taxpayer may be able to claim a tuition tax credit, and / or an education tax credit in respect of taxable employer-paid tuition. In the case of a course taken by the taxpayer while in full-time attendance at a university outside Canada, however, the fees must be for a course of not less than 13 consecutive weeks in duration to be eligible. The rules relating to these tax credits are discussed in detail in Interpretation Bulletins IT-516R2 and IT-515R2 entitled "Tuition Tax Credit" and "Education Tax Credit" respectively and are available on the Canada Revenue Agency website at http://www.cra.gc.ca, or may be obtained by contacting a local tax services office.
Based on the information you provided, it is apparent that the amount you received as a "retraining allowance" from your employer is not eligible for the scholarship exemption. Further, it also appears that the tuition paid by your employer, and the ESL teacher training course you completed, are ineligible toward calculating a tuition tax credit and an education tax credit for the reasons identified above.
We trust that our comments will be of assistance to you.
Yours truly,
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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