9 November 1999 External T.I. 9927775 - TUITITON TAX CREDIT-FLYING CLUB

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.

Principal Issues: 1) With respect to tuition fees paid by a student in the process of obtaining a commercial pilot license, how many hours of flying time are allowable?

2) In cases where aircraft are not available from a flying training school certified by the Minister of Human Resources Development, is the cost of these flying hours allowable for the tuition tax credit? 3) If unused tuition tax credits are being transferred to a parent, can this be done without signing form T2202A?

Position: 1) Paragraph 29 of IT-516R2, Tuition Tax Credit, indicates that Transport Canada requires that the minimum dual and solo flying time is 45 hours for a Private Pilot's Licence and 65 additional hours for a Commercial Pilot's Licence. Confirmed with Transport Canada that the minimum dual and solo flying times in a airplane for a Private Pilot's Licence and a Commercial Pilot's Licence is still 45 hours and an additional 65 hours, respectively.

2) No. With particular reference to flight instruction tuition, fees are only eligible for calculating the tax credit where the individual is taking flying lessons in order to become a commercial pilot or professional instructor. The individual must be under

instruction and direct supervision for the fees to be considered as tuition. The cost of dual and solo flying time, up to the minimum flight training requirements of the Department of Transport to obtain a Private Pilot's Licence or Commercial Pilot's Licence, is considered to be tuition. In contrast, the cost of flying time while not under instruction is not to be so considered even if the fees were paid to a qualifying educational institution. Ground school and flight simulator fees are eligible but costs incurred by an individual flying a personal aircraft while taking a course at a flying training school or club are not eligible. A certificate (form TL11B) must be submitted with an individual's tax return when claiming eligible tuition fees.

3) The back of form T2202, Education Amounts Certificate, has to be signed by the student in order to transfer the unused tuition tax credit to his or her parent or grandparent. I spoke to Eric Watterud, Client Services Directorate, on October 26, 1999. Mr. Watterud confirmed that there is no room on form TL11B for a certification area to transfer tuition for flight courses to a parent or grandparent. Accordingly, the certification area (Part 4) of Form T2202, Education Amounts Certificate, is to be used.

Reasons: See IT-516R2, Tuition Fees. Also, see 9331896, EC4742, EC4670, E73885A, E58397, E57015, E9507095

XXXXXXXXXX 992777
G. Moore
November 9, 1999

Dear XXXXXXXXXX:

Re: Tuition Tax Credit

This is in reply to your letter of October 18, 1999, regarding the tuition tax credit for a client in the process of obtaining a commercial pilot licence.

You are seeking clarification regarding paragraphs 29 and 30 of IT-516R2, Tuition Tax Credit, and have the following questions:

1. How many hours of flying time are allowable for the tuition tax credit? The AIP Canada manual from Transport Canada indicates 200 hours for a commercial pilot licence but paragraph 29 indicates a total of 110 hours. Are the hours spent obtaining various ratings such as Instrument, Night or Seaplane in addition to the 110 hours in the bulletin?

2. In cases where aircraft are not available from a flying training school certified by the Minister of Human Resources Development (e.g., a seaplane, or regular plane for solo hours because of better schedule or price) are the cost of these hours allowable for the tuition tax credit? If so, is a TL11B certificate required or is a commercial receipt acceptable to support a tuition tax credit claim?

3. If unused tuition tax credits are to be transferred to a parent, can this be done without a signed off T2202A form for all amounts so transferred?

Our Comments

Under subparagraph 118.5(1)(a)(ii) of the Act, there may be included, in calculating the amount deductible from an individual's tax payable, the amount of any fees for his or her tuition paid to certain educational institutions. The eligible institutions are those in Canada that have been certified by the Minister of Human Resources Development as providing courses that furnish a person with skills for, or improve a person's skills in, an occupation. The fees included in calculating the tuition tax credit must be allocated on a calendar year basis; that is, the portion of any fees paid in one year which are in respect of the following year can only be included in calculating the following year's tuition tax credit. The total of such fees in any one year must exceed $100. Furthermore, the student must be enrolled in the institution for the purpose of obtaining or improving his or her skills in an occupation. To be eligible, the fees must not have been paid on the student's behalf by his or her employer (unless they were included in the individual's income).

With particular reference to flight instruction tuition, fees are only eligible for calculating the tax credit where the individual is taking flying lessons in order to become a commercial pilot or professional instructor. The individual must be under instruction and direct supervision for the fees to be considered as tuition. The cost of dual and solo flying time, up to the minimum flight training requirements of the Department of Transport to obtain a Private Pilot's Licence or Commercial Pilot's Licence, is considered to be tuition. In contrast, the cost of flying time while not under instruction is not to be so considered even if the fees were paid to a qualifying educational institution. Ground school and flight simulator fees are eligible but costs incurred by an individual flying a personal aircraft while taking a course at a flying training school or club are not eligible.

Paragraph 29 of IT-516R2 indicates that the Department of Transport requires that the minimum dual and solo flying time is 45 hours for a Private Pilot's Licence and 65 additional hours for a Commercial Pilot's Licence. Based on information available to us from the Department of Transport, the experience requirement for a commercial pilot licence is that, following the issue of a Private Pilot Licence (45 hours), 65 hours of commercial pilot flight training in airplanes is required. In addition, for a Commercial Pilot Licence, as required by the Department of Transport, it is our understanding that an applicant is required to complete a minimum of 200 hours of flight time in airplanes, of which a minimum of 100 hours has to be pilot-in command time including 20 hours of cross-country pilot-in-command flight time. Accordingly, tuition fees paid for flying hours while under instruction and direct supervision up to the minimum flight training requirements (45 hours for a Private Pilot's Licence and an additional 65 hours for a Commercial Pilot's Licence) of the Department of Transport would generally qualify as tuition fees. However, any costs with respect to the additional 200 hours, as described above, would not be eligible. Also, the direct cost of dual or solo flying hours, while under instruction or direct supervision, required to obtain ratings such as Instrument, Night, Flight Instructor, Alternate Landplane or Seaplane would also qualify up to the minimum flight training requirements of the Department of Transport. However, the cost of renting an aircraft by a student at a flying school that is not certified by the Minister of Human Resources Development is not eligible as tuition fees, regardless of whether those hours are part of the minimum flight training hours as described above. In this regard, all eligible fees must be in respect of "instruction" and must be paid to an eligible institution.

With respect to your last question, a certificate (form TL11B) must be submitted with an individual's tax return when claiming eligible tuition fees. If unused tuition tax credits are to be transferred to a parent, this can only be done by having the student sign the back of a form T2202, Education Amounts Certificate, for the amounts so transferred.

We trust the above is of assistance to you.

Yours truly,

J. Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch