| 24(1) | 901858 |
| A. Humenuk | |
| (613) 957-2135 | |
| 19(1) | EACC9717 |
September 21, 1990
Dear Sirs:
Re: CIDA Awards for Canadians
Your request for information on the tax implications associated with the above noted awards has been referred to this division for reply.
In your conversation of August 10, 1990 19(1) Humenuk), you asked for clarification of the tax implications of these awards for the recipients. You explained that as the recipients are typically students with little knowledge of income tax, you would like to provide them with guidelines as to what expenses may be claimed against the award and what type of documentation they should retain.
The income tax treatment of the award depends on whether the amount is considered, for income tax purposes as a research grant or as a scholarship or bursary. We have reviewed the information brochures you submitted entitled "CIDA Awards for Canadians 1990-1991 - Long Term Awards" and "CIDA Professional Awards - networking for the Future" and concluded that, based on the general information provided therein, these awards would not normally be in the nature of research grants as explained in paragraph 18 on the attached Interpretation Bulletin IT-75R2 "Scholarships, Fellowships, Bursaries, Prizes, and Research Grants" and Special Release thereto, an award will only be considered to be a research grant where the terms of the specific grant or award establish that the primary purpose of the award is to carry out research rather than to further the recipient's training or education. Where there is any doubt about the nature of a particular award, the recipient should write to his or her local district taxation office attaching copy of the completed application form, the details of the award itself and any other relevant documentation.
Where the award is granted primarily to train the individual in the field of international development, the amount to be included in income under paragraph 56(1)(n) of the Income Tax Act as a scholarship or bursary is the aggregate of all amounts received under the terms of the award in excess of $500 and no expenses may be claimed against such income.
If an award qualifies as a research grant (the criteria for which are explained in paragraph 9 of IT-75R2), the amount which would be included in income under paragraph 56(1)(o) of the Act is the amount of the grant received in the year less eligible expenses incurred. Eligible expenses include expenses incurred in the year for the purpose of carrying on the work that are not
a. personal or living expenses other than travelling expenses incurred by the recipient while away from home in the course of carrying on the work,
b. expenses for which the recipient has been reimbursed (other than amounts which are part of the grant) or
c. expenses that are otherwise deductible in computing his income for the year.
Paragraphs 27 - 32 of the IT-75R2 provide more details on eligible expenses which may be claimed against research grants. We would like to add that while the cost of meals and lodging for the recipient while travelling may be an eligible expense, the cost of meals and lodging while sojourning is not. Where the recipient of the award sets up a temporary residence in the host country to carry out the work specified in the award, the amount expended for meals and lodging in that place would typically not be considered travelling expenses and would thus not be deductible as a research expense.
Proper vouchers showing the name and address of the vendor, date of purchase and particulars identifying the goods or service should be retained for possible review by the Department at a later date. If the receipts are in a currency other than Canadian, the recipient should also indicate the exchange rate in effect as of the date of the transaction.
We trust our comments will be of assistance to you.
Yours truly,for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch