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: Whether a student loan is included in income.
Position: Question of fact.
Reasons: Whether an amount is included in the recipient's income depends on the facts and documentation of a particular assistance program, including the eligibility requirements for the loan or award, and whether the loan or award is granted as a result of the parent's or student's employment.
XXXXXXXXXX 2010-036137
K. Podor
March 15, 2011
Dear XXXXXXXXXX :
Re: Student Loans
This is in response to your correspondence, wherein you requested answers to certain questions regarding the taxation of student loans.
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 tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments, which may be of assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act ("the Act") unless otherwise indicated.
Our Comments:
Interpretation Bulletin IT-75R4 - "Scholarships. Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance" and IT-340R - "Scholarships, Fellowships, Bursaries, and Research Grants - Forgivable Loans, Repayable Award and Repayable Employment Income" provide information related to your questions. We suggest you refer to these bulletins for a general understanding of the administrative guidelines dealing with student loans, scholarships, repayable awards and financial assistance.
In general, where a student receives a genuine loan to assist in financing their education the loan is not included in the student's income for tax purposes. The term "debt" is not defined in the Act. Whether or not an amount represents a "debt" would be determined after considering all of the facts and documentation of a particular assistance program. For a genuine loan to exist there must be a borrower/lender relationship at the time the loan is made and provisions must generally be made for repayment within a reasonable time frame. Paragraph 3 of IT-340R explains that where the agreement under which an amount is paid gives rise at the time of payment to an enforceable debt, it is our view that the amount is a loan.
Different tax implications may arise where the amounts received are not genuine loans but more akin to a repayable award, a scholarship or an amount received on account of employment.
A repayable award is a scholarship, fellowship, bursary or research grant which the recipient is committed to return if certain conditions are not met. A repayable award is intended to be a grant, which may be repayable under certain circumstances. Generally, financial assistance provided to a student is considered a scholarship if provided by an educational facility. If the financial assistance is considered a repayable award received for educational purposes, the amount would be included in income pursuant to subparagraph 56(1)(n) or 56(1)(o) of the Act. If all or a portion of the award was repaid in a future year, the repayment may be deductible, in certain circumstances, under paragraph 60(q) of the Act.
Where the repayable award is in the form of a scholarship, fellowship or bursary all or a portion of the amount may be exempt from income if the scholarship exemption under subsection 56(3) of the Act applies. To the extent the scholarship exemption does not apply to all or part of the repayable award, this excess is included in the recipient's income in the year received.
Our position on financial assistance received under government-sponsored projects or programs is outlined in paragraphs 4 and 37 of IT-75R4. In the case where a student loan is received from a Department of Education, it is the responsibility of this department to determine whether the amount is taxable to the recipient and to complete any necessary information slips in respect of amounts paid out under the programs they administer.
The information slip will report an amount in the appropriate box number. The slip and box number is referenced on individual lines of the TI general return to assist in preparation of the return.
If a recipient receives an information slip in respect of an amount paid out under a student loans program, the taxpayer should contact the lender if they disagree with how certain items are reported.
We trust these comments are helpful.
Steve Fron
Acting Manager
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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