Principal Issues: Whether fees paid by a student to buy a computer in a specific situation are eligible for the Tuition Tax Credit?
Position: No.
Raisons: See paragraph 27 of IT-516R2
20 May 2011 External T.I. 2011-0394391E5 F - Tuition Tax Credit
Principal Issues: Whether fees paid by a student to buy a computer in a specific situation are eligible for the Tuition Tax Credit?
Position: No.
Raisons: See paragraph 27 of IT-516R2
XXXXXXXXXX
2011-039439 I. Landry, M.Fisc.
May 20, 2011
Dear Mr. XXXXXXXXXX,
Subject: Tuition Tax Credit
This is in response to your letter of February 1, 2011 in which you requested our comments regarding the tuition tax credit under section 118.5 of the Income Tax Act (the "Act") in the following particular situation.
You describe in your letter the situation of an educational institution offering post-secondary courses. Some programs offered by that institution require students enrolled to obtain a laptop. Those students have the choice of purchasing their laptop through a pooled purchase program set up by that institution. Students who opt for this option will receive free technical support, including after-sales services for computer operation and warranty, and computer loans for repairs.
You wish to know if the cost of purchasing a laptop computer by students who have opted for this bundled purchasing program qualify as tuition fees in computing the tuition tax credit in subsection 118.5(1).
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
Our Comments
It appears to us that the situation described in your letter could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documents to the appropriate Tax Services Office for their opinion. However, we are able to offer the following general comments that may be helpful to you. It should be noted that the application of one or more provisions of the Act generally requires the analysis of all facts relating to a particular situation. Accordingly, and in light of the fact that your letter only briefly describes a particular hypothetical situation, our comments below may not be fully applicable in a particular situation.
An individual who is enrolled in a year at an educational institution - university, college or other - located in Canada providing post-secondary courses, may be entitled to the tuition tax credit provided for in paragraph 118.5(1)(a) if certain conditions are satisfied. Subparagraph 118.5(3)(c)(ii) provides that fees of any kind that are charged in respect of property to be acquired by students are not tuition fees for the purpose of calculating the tuition tax credit.
Consequently, we are of the view that in the situation you described to us, the cost of acquiring a laptop by the students who opted for the bundled purchase program does not qualify as tuition fees for the purposes of the calculating the tuition tax credit under subparagraph 118.5(3)(c)(ii). That position is consistent with that set out in paragraph 27 of Interpretation Bulletin IT-516R2, Tuition Tax Credit, which can be viewed on our website at: http://www.cra.gc.ca -arc.gc.ca/E/pub/tp/it516r2/it516r2-e.html#P237_33417, which indicates that fees for goods of enduring value that are to be retained by students are not considered eligible tuition fees for purposes of calculation the tuition tax credit.
Best Regards,
Guy Goulet CA, M. Fisc.
for the Director
Ontario Corporate Income Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch