30 November 2007 External T.I. 2007-0261421E5 - Foreign Post-doctoral fellowship.

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: Clarification regarding the scholarship exemption.

Position: The exemption under subparagraph 56(3)(b)(ii) is only available for fellowships described under subparagraph 56(3)(b)(i).

Reasons: Wording of subparagraph 56(3)(b)(i).

									2007-026142
XXXXXXXXXX 								D. Zhang
(613) 957-2104
November 30, 2007

Dear XXXXXXXXXX:

Re: Foreign post-doctoral fellowship

This is further to our letter to you of November 8, 2007 (file number: 2007-025265) concerning the Canadian tax treatment of financial support received under a foreign post-doctoral fellowship.

In our letter of November 8, 2007, we stated that where the amount received is determined to be a fellowship, the recipients may claim an exemption for the total of all amounts each of which is an expense incurred by them in the taxation year for the purposes of fulfilling the conditions under which the fellowship was received, other than expenses in respect of:

(i) personal or living expenses (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer's usual place of residence for the period to which the fellowship relates);

(ii) expenses for which the taxpayer is entitled to be reimbursed; and

(iii) expenses that are otherwise deductible in computing the taxpayer's income.

We wish to clarify that the above exemption is available only if the fellowship is to be used by the recipients in the production of a literary, dramatic, musical or artistic work. In the circumstances you describe, the foreign post-doctoral fellowships would not be used by the recipients in the production of a literary, dramatic, musical or artistic work. Accordingly, this exemption would not be available.

Where the amount received is determined to be a fellowship, the recipients would, however, be entitled to an exemption of $500, as discussed in our previous letter.

We regret any misunderstanding caused by our letter of November 8, 2007 and we trust that the foregoing comments clarify the tax treatment of financial support received under a foreign post-doctoral fellowship. Please contact Devon Zhang at the above-noted number if you have any questions or concerns.

Yours truly,

Daryl Boychuk
For Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch