| 19(1) | File No. 5-8245 |
| S. Short | |
| (613) 957-2134 |
August 22, 1989
Re: Research Grants
At your request, we have reviewed 19(1) draft document pertaining to its Research Grants Program and offer the following comments and suggestions.
We recommend a statement to the effect that the nature of the research must conform to the definition set out in paragraph 18 of interpretation bulletin IT-75R2. This would provide clarification to your program coverage statement by defining research as intended by the Income Tax Act. The type of research undertaken must be separate and apart from the ordinary research undertaken as part of the normal full-time teaching activities.
This 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 your 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.
Given the above modifications to the draft document of your Research Grants Program, it would appear that the requirements of interpretation bulletin IT-75R2 will have been met and, as such, amounts paid out under the program would qualify as research grants for the purposes of paragraph 56(1)(o) of the Income Tax Act.
Yours truly,
for Director Small Business and General Division Specialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch