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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
930925
XXXXXXXXXX A.W. Larochelle
(616) 952-1361
September 30, 1993
Dear XXXXXXXXXX
Re: Research Grants Programme
We are replying to your letter of March 25, 1993 to which you attached a copy of a draft of the XXXXXXXXXX
In your correspondence you have asked us to confirm that payments made under the programme would qualify as research grants under subsection 56(1)(o) of the Income Tax Act (the Act). We also refer to our telephone conversation of August 23, 1993 (XXXXXXXXXX /Larochelle) and your facsimile of September 27, 1993. We apologize for the delay in providing a response.
Revenue Canada Taxation's primary objective when reviewing such programmes is to ensure that amounts received by the faculty member are accurately characterized as either income from employment or a research grant. The types of deductions available against employment income are restricted to those permitted under section 8 of the Act whereas a research grant may be reduced, up to the amount of the grant, by reasonable expenses incurred in the course of conducting the specific research.
Where the grant recipient's normal salary is reduced, it is implied that the individual's normal employment duties have been reduced accordingly in order to provide the time necessary to conduct the specific research project.
As discussed in our telephone conversation, the Department does not have any specific guidelines concerning the magnitude of a payment in lieu of salary which may be designated as a research grant. We would accept a ceiling of 50% of annual salary for faculty members not on sabbatical leave if it is reasonable in the circumstances. For instance, if time allocated to specific research under the program is taken from time spent on ordinary research and the time spent on ordinary research usually comprises 50% of salaried time, then the retention of 50% of salary could be reasonable.
You have made reference in your correspondence to Interpretation Bulletin IT-75R2 which provides guidelines as to the distinction between ordinary research which forms part of a faculty member's normal duties of employment and specific research which falls outside normal employment activity for which the faculty member is being remunerated by salary. The level of controls included in the programme's proposed guidelines and conditions appear to be sufficient to ensure that only research projects that are specific in nature are considered for grant funding.
As a result, the terms and conditions of the programme as detailed in your submission conform to the guidelines outlined in the interpretation bulletin and, if carried out in the manner described therein, we advise that the amounts awarded under the programme will be treated as research grant income to be included in the recipient's income to the extent required under paragraph 56(1)(o) of the Act.
Yours truly,
P.D. Fuoco for Director Business and General Division Speciality Rulings Directorate Legislative and Intergovernmental Affairs Branch
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