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: Taxation of a particular research grant - is amount received by the researcher or the institution.
Position: The amount is received by the researcher and as such is taxable under paragraph 56(1)(o) to the extent that the amount received exceeds the allowable research expenses.
Reasons: The law.
XXXXXXXXXX 2008-026825
Michael Cooke
June 5, 2008
Dear XXXXXXXXXX ,
Re: Research Grant Status – Paragraph 56(1)(o) of the Income Tax Act (the “Act”)
We are writing in response to your correspondence of February 14, 2008, concerning the above-noted provision of the Act.
In your correspondence you indicate that you are a XXXXXXXXXX . You also indicate that you were recently awarded a XXXXXXXXXX grant (as a XXXXXXXXXX ) to fund the XXXXXXXXXX . You are of the view that this research fulfils all of the definitions of research as laid out in paragraph 22 of Interpretation Bulletin IT-75R4 – “Scholarships, Fellowships, Bursaries, Prizes, and Research Grants”. You also maintain that all of the funds to be received from the XXXXXXXXXX in respect of this grant are to be used for purchasing equipment, hiring assistants, and presenting the research findings, and that no portion of these funds is available for your personal benefit.
The XXXXXXXXXX issued you a cheque for $XXXXXXXXXX on XXXXXXXXXX in respect of a partial payment of this research grant. You indicate that upon receipt you endorsed the cheque in favour of the XXXXXXXXXX such that these XXXXXXXXXX grant monies were ultimately deposited in a XXXXXXXXXX research account that is used to fund this research project. All the expenditures in respect of this research project are overseen and administered by the XXXXXXXXXX
You ask whether we will accept that the conditions described in paragraph 24 of IT-75R4 have been met such that, for purposes of paragraph 56(1)(o) of the Act, the XXXXXXXXXX grant monies will not be considered to have been received by you.
Our Comments
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. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following comments.
As noted in Paragraph 24 of IT-75R4, a research grant is not considered to be “received” at any time for the purposes of paragraph 56(1)(o) if all of the following circumstances apply:
- funds are made available to an individual who holds an academic appointment at a university, hospital, or similar institution, to enable the individual to carry on research or similar work;
- the funds are paid directly to the university, hospital, or similar institution; [emphasis added]
- the funds are provided only to pay for the costs of the research project; and
- the funds were not used by the individual and were not otherwise available for the personal benefit of the individual.
Since the XXXXXXXXXX grant monies are being paid directly to you and not the XXXXXXXXXX it is our view that it is not possible to consider that “the funds are paid directly to the university” as described above. As such, paragraph 56(1)(o) will apply and the XXXXXXXXXX will be required to issue you a T4A slip for any amounts paid to you in respect of this grant during the year.
However, as noted in paragraph 21 of IT-75R4, to the extent that the XXXXXXXXXX grant funds are only used for the purchase of equipment, hiring assistants, and presenting the research findings (i.e. allowable research expenses), and that no portion of these funds is available for your personal benefit, such funds will only be included in your income under paragraph 56(1)(o) of the Act to the extent that they exceed the total of such allowable research expenses incurred by you or on your behalf by the XXXXXXXXXX in the particular year in respect of this particular research project.
We trust our comments will be of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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