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) Whether Financial Assistance paid to students is taxable per s. 56(1)(n) as a bursary.
2) Whether T4A's should be issued to students.
Position: 1) Yes. 2) Yes.
Reasons: ITA
XXXXXXXXXX 2006-018747
Joy Bertram
January 14, 2007
Dear XXXXXXXXXX:
Re: Financial Assistance to International and Aboriginal Students - Paragraph 56(1)(n)
We are writing in response to your e-mail of May 19, 2006, wherein you requested our opinion on whether certain financial assistance paid to International and Aboriginal students as directed by donors is considered taxable income to the students under the Income Tax Act (the Act) and whether T4A's should be issued to those students.
As a Post-Secondary Institution, XXXXXXXXXX provides financial assistance to students to cover certain living expenses. You indicated that this assistance is provided to the student as a non-repayable gift. It is intended to cover living expenses including rent, utilities, food medical coverage, transportation, international travel, tuition, books and other incidentals. The assistance is funded by donations to XXXXXXXXXX and is provided to both International and Aboriginal students. The amount paid to students is donor directed. In the case of Aboriginal students, you indicated that the donations are not from reservation funds. The assistance may be provided as a one-time lump sum payment or paid periodically throughout the year.
Written confirmation of the tax implications inherent in particular transactions is given by the 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 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 program. However, based on the limited information provided to us, we are prepared to offer the following general comments, which may be of assistance.
In our view, the benefits provided to students under your program fall within the broad meaning of bursary as contemplated under paragraph 56(1)(n) of the Act. What constitutes a bursary is not defined in the Act and the Agency takes the general view that its meaning is broad enough to encompass almost any form of financial assistance paid to a student to enable the student to pursue his or her education. This view is also consistent with the decision of the Federal Court of Appeal in Simser v The Queen, 2005 DTC 5001. For more information you may wish to consult IT-75R4 Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance. As such, XXXXXXXXXX will be responsible for filing a T4A information return and providing the students with a T4A slip pursuant to subsection 200(2) of the Income Tax Regulations.
Please note that where an individual is otherwise required to include an amount in income under paragraph 56(1)(n), pursuant to subsection 56(3), the first $500 or, if the amount is received in connection with an educational program that is eligible for the education tax credit under section 118.6 of the Act, up to $3,000, is exempt from income. Further, under amendments to the Act proposed in the 2006 Federal Budget, the $3,000 exemption for qualifying amounts will be increased to a full exemption in 2006 and subsequent taxation years. Notwithstanding that a particular student may be eligible for a full exemption under the 2006 Budget proposals, the payer will still be required to file the T4A information return and provide the student with a T4A slip.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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