§117 — Qualified scholarships
409 citing cases
Statute Text — 26 U.S.C. §117
Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii).
For purposes of this section—
The term “qualified scholarship” means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses.
For purposes of paragraph (1), the term “qualified tuition and related expenses” means—
tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii), and
fees, books, supplies, and equipment required for courses of instruction at such an educational organization.
Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction.
Paragraph (1) shall not apply to any amount received by an individual under—
the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act,
the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of chapter 105 of title 10, United States Code, or
a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in such section).
Gross income shall not include any qualified tuition reduction.
For purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of—
such employee, or
any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).
Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q).
In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase “(below the graduate level)”.
Treasury Regulations
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Treas. Reg. §1.117-1Exclusion of amounts received as a scholarship or fellowship grant
(a) In general. Any amount received by an individual as a scholarship at an educational institution or as a fellowship grant, including the value of contributed services and accommodations, shall be excluded from the gross income of the recipient, subject to the limitations set forth in section 117(b) and § 1.117-2. The exclusion from gross income of an amount which is a scholarship or fellowship grant is controlled solely by section 117. Accordingly, to the extent that a scholarship or a fellowship grant exceeds the limitations of section 117(b) and § 1.117-2, it is includible in the gross income of the recipient notwithstanding the provisions of section 102 relating to exclusion from gross income of gifts, or section 74(b) relating to exclusion from gross income of certain prizes and awards. For definitions, see § 1.117-3.
(b) Exclusion of amounts received to cover expenses. (1) Subject to the limitations provided in subparagraph (2) of this paragraph, any amount received by an individual to cover expenses for travel (including meals and lodging while traveling and an allowance for travel of the individual's family), research, clerical help, or equipment is excludable from gross income provided that such expenses are incident to a scholarship or fellowship grant which is excludable from gross income under section 117(a)(1). If, however, only a portion of a scholarship or fellowship grant is excludable from gross income under section 117(a)(1) because of the part-time employment limitation contained in section 117(b)(1) or because of the expiration of the 36-month period described in section 117(b)(2)(B), only the amount received to cover expenses incident to such excludable portion is excludable from gross income. The requirement that these expenses be incident to the scholarship or the fellowship grant means that the expenses of travel, research, clerical help, or equipment must be incurred by the individual in order to effectuate the purpose for which the scholarship or the fellowship grant was awarded.
(2)(i) In the case of a scholarship or fellowship grant which is awarded after July 28, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the amount received by the individual is specifically designated to cover expenses for travel, research, clerical help, or equipment.
(ii) In the case of a scholarship or fellowship grant awarded before July 29, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the recipient establishes, by competent evidence, that the amount was received to cover expenses for travel, research, clerical help, or equipment, but such amount need not be specifically designated. The fact that the recipient actually incurred expenses for travel, research, clerical help, or equipment is not sufficient to establish that the amount was received to cover such expenses.
(iii) The exclusion provided under subparagraph (1) of this paragraph is applicable only to the extent that the amount received for travel, research, clerical help, or equipment is actually expended for such expenses by the recipient during the term of the scholarship or fellowship grant and within a reasonable time before and after such term.
(3) The portion of any amount received to cover the expenses described in subparagraph (1) of this paragraph which is not actually expended for such expenses within the exclusion period described in subparagraph (2) of this paragraph shall, if not returned to the grantor within this period, be included in the gross income of the recipient for the taxable year in which such exclusion period expires.
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Treas. Reg. §1.117-1(a)In general.
In general. Any amount received by an individual as a scholarship at an educational institution or as a fellowship grant, including the value of contributed services and accommodations, shall be excluded from the gross income of the recipient, subject to the limitations set forth in section 117(b) and § 1.117-2. The exclusion from gross income of an amount which is a scholarship or fellowship grant is controlled solely by section 117. Accordingly, to the extent that a scholarship or a fellowship grant exceeds the limitations of section 117(b) and § 1.117-2, it is includible in the gross income of the recipient notwithstanding the provisions of section 102 relating to exclusion from gross income of gifts, or section 74(b) relating to exclusion from gross income of certain prizes and awards. For definitions, see § 1.117-3.
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Treas. Reg. §1.117-1(b)Exclusion of amounts received to cover expenses.
Exclusion of amounts received to cover expenses. (1) Subject to the limitations provided in subparagraph (2) of this paragraph, any amount received by an individual to cover expenses for travel (including meals and lodging while traveling and an allowance for travel of the individual's family), research, clerical help, or equipment is excludable from gross income provided that such expenses are incident to a scholarship or fellowship grant which is excludable from gross income under section 117(a)(1). If, however, only a portion of a scholarship or fellowship grant is excludable from gross income under section 117(a)(1) because of the part-time employment limitation contained in section 117(b)(1) or because of the expiration of the 36-month period described in section 117(b)(2)(B), only the amount received to cover expenses incident to such excludable portion is excludable from gross income. The requirement that these expenses be incident to the scholarship or the fellowship grant means that the expenses of travel, research, clerical help, or equipment must be incurred by the individual in order to effectuate the purpose for which the scholarship or the fellowship grant was awarded.
(2)(i) In the case of a scholarship or fellowship grant which is awarded after July 28, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the amount received by the individual is specifically designated to cover expenses for travel, research, clerical help, or equipment.
(ii) In the case of a scholarship or fellowship grant awarded before July 29, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the recipient establishes, by competent evidence, that the amount was received to cover expenses for travel, research, clerical help, or equipment, but such amount need not be specifically designated. The fact that the recipient actually incurred expenses for travel, research, clerical help, or equipment is not sufficient to establish that the amount was received to cover such expenses.
(iii) The exclusion provided under subparagraph (1) of this paragraph is applicable only to the extent that the amount received for travel, research, clerical help, or equipment is actually expended for such expenses by the recipient during the term of the scholarship or fellowship grant and within a reasonable time before and after such term.
(3) The portion of any amount received to cover the expenses described in subparagraph (1) of this paragraph which is not actually expended for such expenses within the exclusion period described in subparagraph (2) of this paragraph shall, if not returned to the grantor within this period, be included in the gross income of the recipient for the taxable year in which such exclusion period expires.
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Treas. Reg. §1.117-2Limitations
(a) Individuals who are candidates for degrees—(1) In general. Under the limitations provided by section 117(b)(1) in the case of an individual who is a candidate for a degree at an educational institution, the exclusion from gross income shall not apply (except as otherwise provided in subparagraph (2) of this paragraph) to that portion of any amount received as payment for teaching, research, or other services in the nature of parttime employment required as a condition to receiving the scholarship or fellowship grant. Payments for such part-time employment shall be included in the gross income of the recipient in an amount determined by reference to the rate of compensation ordinarily paid for similar services performed by an individual who is not the recipient of a scholarship or a fellowship grant. A typical example of employment under this subparagraph is the case of an individual who is required, as a condition to receiving the scholarship or the fellowship grant, to perform part-time teaching services. A requirement that the individual shall furnish periodic reports to the grantor of the scholarship or the fellowship grant for the purpose of keeping the grantor informed as to the general progress of the individual shall not be deemed to constitute the performance of services in the nature of part-time employment.
(2) Exception. If teaching, research, or other services are required of all candidates (whether or not recipients of scholarships or fellowship grants) for a particular degree as a condition to receiving the degree, such teaching, research, or other services on the part of the recipient of a scholarship or fellowship grant who is a candidate for such degree shall not be regarded as part-time employment within the meaning of this paragraph. Thus, if all candidates for a particular education degree are required, as part of their regular course of study or curriculum, to perform part-time practice teaching services, such services are not to be regarded as part-time employment within the meaning of this paragraph.
(b) Individuals who are not candidates for degrees—(1) Conditions for exclusion. In the case of an individual who is not a candidate for a degree at an educational institution, the exclusion from gross income of an amount received as a scholarship or a fellowship grant shall apply (to the extent provided in subparagraph (2) of this paragraph) only if the grantor of the scholarship or fellowship grant is—
(i) An organization described in section 501(c)(3) which is exempt from tax under section 501(a),
(ii) The United States or an instrumentality or agency thereof, or a State, a territory, or a possession of the United States, or any political subdivision thereof, or the District of Columbia, or
(iii) For taxable years beginning after December 31, 1961, a foreign government, an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to section 103 of the Mutual Educational and Cultural Exchange Act of 1961 (22 U.S.C. 2453).
(2) Extent of exclusion. (i) In the case of an individual who is not a candidate for a degree, the amount received as a scholarship or a fellowship grant which is excludable from gross income under section 117(a)(1) shall not exceed an amount equal to $300 times the number of months for which the recipient received amounts under the scholarship or fellowship grant during the taxable year. In determining the number of months during the period for which the recipient received amounts under a scholarship or fellowship grant, computation shall be made on the basis of whole calendar months. A whole calendar month means a period of time terminating with the day of the succeeding month numerically corresponding to the day of the month of its beginning, less one, except that if there be no corresponding day of the succeeding month the period terminates with the last day of the succeeding month. For purposes of this computation a fractional part of a calendar month consisting of a period of time including 15 days or more shall be considered to be a whole calendar month and a fractional part of a calendar month consisting of a period of time including 14 days or less shall be disregarded. For example, if an individual receives a fellowship grant on September 13 which is to expire on June 12 of the following year, the grant shall be considered to have extended for a period of 9 months. If in the preceding example the grant expired on June 27, instead of June 12, the grant shall be considered to have extended for a period of 10 months.
(ii) No exclusion shall be allowed under section 117(a)(1) to an individual who is not a candidate for a degree after the recipient has, as an individual who is not a candidate for a degree, been entitled to an exclusion under that section for a period of 36 months. This limitation applies if the individual has received any amount which was either excluded or excludable from his gross income under section 117(a)(1) for any prior 36 months, whether or not consecutive. For example, if the individual received a fellowship grant of $7,200 for 3 years (which he elected to receive in 36 monthly installments of $200), his exclusion period would be exhausted even though he did not in any of the 36 months make use of the maximum exclusion. Accordingly, such individual would be entitled to no further exclusion from gross income with respect to any additional grants which he may receive as an individual who is not a candidate for a degree.
(iii) If an individual who is not a candidate for a degree receives amounts from more than one scholarship or fellowship grant during the taxable year, the total amounts received in the taxable year shall be aggregated for the purpose of computing the amount which may be excludable from gross income for such taxable year. If amounts are received from more than one scholarship or fellowship grant during the same month or months within the taxable year, such month or months shall be counted only once for the purpose of determining the number of months for which the individual received such amounts under the scholarships or fellowship grants during the taxable year. For example, if an individual receives a fellowship grant from one source for the months of January to June of the taxable year and also receives a fellowship grant from another source for the months of March through December of the same taxable year, he shall be considered to have received amounts for 12 months of the taxable year. See example (4) in subparagraph (3) of this paragraph for further illustration.
(3) Examples. The application of this paragraph may be further illustrated by the following examples, it being assumed that in each example the grantor is a grantor who is described in section 117(b)(2)(A) and subparagraph (1) of this paragraph:
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Treas. Reg. §1.117-2(a)Individuals who are candidates for degrees—(1) In general.
Individuals who are candidates for degrees—(1) In general. Under the limitations provided by section 117(b)(1) in the case of an individual who is a candidate for a degree at an educational institution, the exclusion from gross income shall not apply (except as otherwise provided in subparagraph (2) of this paragraph) to that portion of any amount received as payment for teaching, research, or other services in the nature of parttime employment required as a condition to receiving the scholarship or fellowship grant. Payments for such part-time employment shall be included in the gross income of the recipient in an amount determined by reference to the rate of compensation ordinarily paid for similar services performed by an individual who is not the recipient of a scholarship or a fellowship grant. A typical example of employment under this subparagraph is the case of an individual who is required, as a condition to receiving the scholarship or the fellowship grant, to perform part-time teaching services. A requirement that the individual shall furnish periodic reports to the grantor of the scholarship or the fellowship grant for the purpose of keeping the grantor informed as to the general progress of the individual shall not be deemed to constitute the performance of services in the nature of part-time employment.
(2) Exception. If teaching, research, or other services are required of all candidates (whether or not recipients of scholarships or fellowship grants) for a particular degree as a condition to receiving the degree, such teaching, research, or other services on the part of the recipient of a scholarship or fellowship grant who is a candidate for such degree shall not be regarded as part-time employment within the meaning of this paragraph. Thus, if all candidates for a particular education degree are required, as part of their regular course of study or curriculum, to perform part-time practice teaching services, such services are not to be regarded as part-time employment within the meaning of this paragraph.
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Treas. Reg. §1.117-2(b)Individuals who are not candidates for degrees—(1) Conditions for exclusion.
Individuals who are not candidates for degrees—(1) Conditions for exclusion. In the case of an individual who is not a candidate for a degree at an educational institution, the exclusion from gross income of an amount received as a scholarship or a fellowship grant shall apply (to the extent provided in subparagraph (2) of this paragraph) only if the grantor of the scholarship or fellowship grant is—
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Treas. Reg. §1.117-2(i)§1.117-2(i)
An organization described in section 501(c)(3) which is exempt from tax under section 501(a),
(ii) The United States or an instrumentality or agency thereof, or a State, a territory, or a possession of the United States, or any political subdivision thereof, or the District of Columbia, or
(iii) For taxable years beginning after December 31, 1961, a foreign government, an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to section 103 of the Mutual Educational and Cultural Exchange Act of 1961 (22 U.S.C. 2453).
(2) Extent of exclusion. (i) In the case of an individual who is not a candidate for a degree, the amount received as a scholarship or a fellowship grant which is excludable from gross income under section 117(a)(1) shall not exceed an amount equal to $300 times the number of months for which the recipient received amounts under the scholarship or fellowship grant during the taxable year. In determining the number of months during the period for which the recipient received amounts under a scholarship or fellowship grant, computation shall be made on the basis of whole calendar months. A whole calendar month means a period of time terminating with the day of the succeeding month numerically corresponding to the day of the month of its beginning, less one, except that if there be no corresponding day of the succeeding month the period terminates with the last day of the succeeding month. For purposes of this computation a fractional part of a calendar month consisting of a period of time including 15 days or more shall be considered to be a whole calendar month and a fractional part of a calendar month consisting of a period of time including 14 days or less shall be disregarded. For example, if an individual receives a fellowship grant on September 13 which is to expire on June 12 of the following year, the grant shall be considered to have extended for a period of 9 months. If in the preceding example the grant expired on June 27, instead of June 12, the grant shall be considered to have extended for a period of 10 months.
(ii) No exclusion shall be allowed under section 117(a)(1) to an individual who is not a candidate for a degree after the recipient has, as an individual who is not a candidate for a degree, been entitled to an exclusion under that section for a period of 36 months. This limitation applies if the individual has received any amount which was either excluded or excludable from his gross income under section 117(a)(1) for any prior 36 months, whether or not consecutive. For example, if the individual received a fellowship grant of $7,200 for 3 years (which he elected to receive in 36 monthly installments of $200), his exclusion period would be exhausted even though he did not in any of the 36 months make use of the maximum exclusion. Accordingly, such individual would be entitled to no further exclusion from gross income with respect to any additional grants which he may receive as an individual who is not a candidate for a degree.
(iii) If an individual who is not a candidate for a degree receives amounts from more than one scholarship or fellowship grant during the taxable year, the total amounts received in the taxable year shall be aggregated for the purpose of computing the amount which may be excludable from gross income for such taxable year. If amounts are received from more than one scholarship or fellowship grant during the same month or months within the taxable year, such month or months shall be counted only once for the purpose of determining the number of months for which the individual received such amounts under the scholarships or fellowship grants during the taxable year. For example, if an individual receives a fellowship grant from one source for the months of January to June of the taxable year and also receives a fellowship grant from another source for the months of March through December of the same taxable year, he shall be considered to have received amounts for 12 months of the taxable year. See example (4) in subparagraph (3) of this paragraph for further illustration.
(3) Examples. The application of this paragraph may be further illustrated by the following examples, it being assumed that in each example the grantor is a grantor who is described in section 117(b)(2)(A) and subparagraph (1) of this paragraph:
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Treas. Reg. §1.117-3Definitions
(a) Scholarship. A scholarship generally means an amount paid or allowed to, or for the benefit of, a student, whether an undergraduate or a graduate, to aid such individual in pursuing his studies. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to a student to aid him in pursuing his studies. The term also includes any amount received in the nature of a family allowance as a part of a scholarship. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in pursuing his studies where the grantor is motivated by family or philanthropic considerations. If an educational institution maintains or participates in a plan whereby the tuition of a child of a faculty member of such institution is remitted by any other participating educational institution attended by such child, the amount of the tuition so remitted shall be considered to be an amount received as a scholarship.
(b) Educational organization. For definition of “educational organization” paragraphs (a) and (b) of section 117 adopt the definition of that term which is prescribed in section 151(e)(4). Accordingly, for purposes of section 117 the term “educational organization” means only an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on. See section 151(e)(4) and regulations thereunder.
(c) Fellowship grant. A fellowship grant generally means an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to an individual to aid him in the pursuit of study or research. The term also includes any amount received in the nature of a family allowance as a part of a fellowship grant. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in the pursuit of study or research where the grantor is motivated by family or philanthropic considerations.
(d) Contributed services and accommodations. The term “contributed services and accommodations” means such services and accommodations as room, board, laundry service, and similar services or accommodations which are received by an individual as a part of a scholarship or fellowship grant.
(e) Candidate for a degree. The term “candidate for a degree” means an individual, whether an undergraduate or a graduate, who is pursuing studies or conducting research to meet the requirements for an academic or professional degree conferred by colleges or universities. It is not essential that such study or research be pursued or conducted at an educational institution which confers such degrees if the purpose thereof is to meet the requirements for a degree of a college or university which does confer such degrees. A student who receives a scholarship for study at a secondary school or other educational institution is considered to be a “candidate for a degree.”
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Treas. Reg. §1.117-3(a)Scholarship.
Scholarship. A scholarship generally means an amount paid or allowed to, or for the benefit of, a student, whether an undergraduate or a graduate, to aid such individual in pursuing his studies. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to a student to aid him in pursuing his studies. The term also includes any amount received in the nature of a family allowance as a part of a scholarship. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in pursuing his studies where the grantor is motivated by family or philanthropic considerations. If an educational institution maintains or participates in a plan whereby the tuition of a child of a faculty member of such institution is remitted by any other participating educational institution attended by such child, the amount of the tuition so remitted shall be considered to be an amount received as a scholarship.
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Treas. Reg. §1.117-3(b)Educational organization.
Educational organization. For definition of “educational organization” paragraphs (a) and (b) of section 117 adopt the definition of that term which is prescribed in section 151(e)(4). Accordingly, for purposes of section 117 the term “educational organization” means only an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on. See section 151(e)(4) and regulations thereunder.
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Treas. Reg. §1.117-3(c)Fellowship grant.
Fellowship grant. A fellowship grant generally means an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to an individual to aid him in the pursuit of study or research. The term also includes any amount received in the nature of a family allowance as a part of a fellowship grant. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in the pursuit of study or research where the grantor is motivated by family or philanthropic considerations.
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Treas. Reg. §1.117-3(d)Contributed services and accommodations.
Contributed services and accommodations. The term “contributed services and accommodations” means such services and accommodations as room, board, laundry service, and similar services or accommodations which are received by an individual as a part of a scholarship or fellowship grant.
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Treas. Reg. §1.117-3(e)Candidate for a degree.
Candidate for a degree. The term “candidate for a degree” means an individual, whether an undergraduate or a graduate, who is pursuing studies or conducting research to meet the requirements for an academic or professional degree conferred by colleges or universities. It is not essential that such study or research be pursued or conducted at an educational institution which confers such degrees if the purpose thereof is to meet the requirements for a degree of a college or university which does confer such degrees. A student who receives a scholarship for study at a secondary school or other educational institution is considered to be a “candidate for a degree.”
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Treas. Reg. §1.117-4Items not considered as scholarships or fellowship grants
The following payments or allowances shall not be considered to be amounts received as a scholarship or a fellowship grant for the purpose of section 117:
(a) Educational and training allowances to veterans. Educational and training allowances to a veteran pursuant to section 400 of the Servicemen's Readjustment Act of 1944 (58 Stat. 287) or pursuant to 38 U.S.C. 1631 (formerly section 231 of the Veterans' Readjustment Assistance Act of 1952).
(b) Allowances to members of the Armed Forces of the United States. Tuition and subsistence allowances to members of the Armed Forces of the United States who are students at an educational institution operated by the United States or approved by the United States for their education and training, such as the United States Naval Academy and the United States Military Academy.
(c) Amounts paid as compensation for services or primarily for the benefit of the grantor. (1) Except as provided in paragraph (a) of §§ 1.117-2 and 1.117-5, any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research, if such amount represents either compensation for past, present, or future employment services or represents payment for services which are subject to the direction or supervision of the grantor.
(2) Any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research primarily for the benefit of the grantor.
However, amounts paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research are considered to be amounts received as a scholarship or fellowship grant for the purpose of section 117 if the primary purpose of the studies or research is to further the education and training of the recipient in his individual capacity and the amount provided by the grantor for such purpose does not represent compensation or payment for the services described in subparagraph (1) of this paragraph. Neither the fact that the recipient is required to furnish reports of his progress to the grantor, nor the fact that the results of his studies or research may be of some incidental benefits to the grantor shall, of itself, be considered to destroy the essential character of such amount as a scholarship or fellowship grant.
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Treas. Reg. §1.117-4(a)Educational and training allowances to veterans.
Educational and training allowances to veterans. Educational and training allowances to a veteran pursuant to section 400 of the Servicemen's Readjustment Act of 1944 (58 Stat. 287) or pursuant to 38 U.S.C. 1631 (formerly section 231 of the Veterans' Readjustment Assistance Act of 1952).
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Treas. Reg. §1.117-4(b)Allowances to members of the Armed Forces of the United States.
Allowances to members of the Armed Forces of the United States. Tuition and subsistence allowances to members of the Armed Forces of the United States who are students at an educational institution operated by the United States or approved by the United States for their education and training, such as the United States Naval Academy and the United States Military Academy.
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Treas. Reg. §1.117-4(c)Amounts paid as compensation for services or primarily for the benefit of the grantor.
Amounts paid as compensation for services or primarily for the benefit of the grantor. (1) Except as provided in paragraph (a) of §§ 1.117-2 and 1.117-5, any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research, if such amount represents either compensation for past, present, or future employment services or represents payment for services which are subject to the direction or supervision of the grantor.
(2) Any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research primarily for the benefit of the grantor.
However, amounts paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research are considered to be amounts received as a scholarship or fellowship grant for the purpose of section 117 if the primary purpose of the studies or research is to further the education and training of the recipient in his individual capacity and the amount provided by the grantor for such purpose does not represent compensation or payment for the services described in subparagraph (1) of this paragraph. Neither the fact that the recipient is required to furnish reports of his progress to the grantor, nor the fact that the results of his studies or research may be of some incidental benefits to the grantor shall, of itself, be considered to destroy the essential character of such amount as a scholarship or fellowship grant.
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Treas. Reg. §1.117-5Federal grants requiring future service as a Federal employee
(a) In general. Under section 117(c), amounts received by an individual under a Federal program as a scholarship or grant for qualified tuition and expenses at an institution of higher education are excluded from the gross income of the recipient even though the recipient is required to perform future service as a Federal employee. See paragraph (c) of this section for the definitions of the terms “qualified tuition and expenses” and “institution of higher education.”
(b) Exception for uniformed services scholarship programs. The requirements of this section do not apply to amounts received before 1985 by a member of a uniformed service who entered training before 1981 under the Armed Forces Health Professions Scholarship Program, National Public Health Service Corps Scholarship Training Program, or other substantially similar Federal programs requiring the recipient to work for a uniformed Federal service after completion of studies. These awards are governed by section 4 of Pub. L. 93-483 as amended by Pub. L. 95-171, Pub. L. 95-600 and Pub. L. 96-167. See section 101(3) of title 37, United States Code for the definition of the term “uniformed service.”
(c) Definitions—(1) Qualified tuition and related expenses. For purposes of section 117(c) and this section, qualified tuition and related expenses are those amounts which under the terms of the Federal program are required to be used and in fact are used for payment of:
(i) Tuition and fees that are required for the recipient's enrollment or attendance at an institution of higher education; and
(ii) Those amounts used for payment of fees, books, supplies and equipment required for courses of instruction at such an institution.
Incidental expenses are not considered related expenses and thus are not excludable from gross income under section 117(c). Incidental expenses include room and board at an institution of higher education, expenses for travel (including expenses for meals and lodging incurred during travel and allowances for travel of the recipient's family), research, clerical help, equipment and other expenses which are not required for enrollment at the institution or in a course of instruction at such institution.
(2) Institution of higher education. To qualify as an institution of higher education under this section, the institution must be a public or other nonprofit institution in any state which—
(i) Admits as regular students only individuals who have a certificate of graduation from a high school or the recognized equivalent of such a certificate;
(ii) Is legally authorized within the state to provide a program of education beyond high school; and
(iii) Provides an education program for which it awards a bachelor's or higher degree or which is acceptable for full credit towards such a degree, or which trains and prepares students for gainful employment in a recognized health profession. For purposes of this section, recognized health professions are those health professions which are supervised or monitored by appropriate state or Federal agencies or governing professional associations and which require members to be currently licensed or certified in order to practice.
(3) Service as a Federal employee—(i) In general. Except as otherwise provided in paragraph (c)(3)(ii) of this section, service as a Federal employee refers to employment of the recipient by the Federal government to work directly for the Federal government. Thus, Federal grants or scholarships which do not require the recipient to work directly for the Federal government are not governed by the rules of this section.
(ii) Service in a health manpower shortage area. For purposes of this section an obligation under a grant for the recipient to serve in a health related field in a health manpower shortage area as designated by the Secretary of Health and Human Services according to the criteria of the Public Health Services Act (42 U.S.C. 254(e)) and the regulations promulgated thereunder (42 CFR 5.1-5.4) will be considered an obligation to serve as a Federal employee.
(d) Records required for exclusion from gross income. To exclude amounts received under Federal programs requiring future services as a Federal employee, the recipient must maintain records that establish that the amounts received under such programs were used for qualified tuition and related expenses as defined in paragraph (c)(1) of this section. Qualifying uses may be established by providing to the Service, upon request, copies of relevant bills, receipts, cancelled checks or other convenient documentation or records which clearly reflect the use of the money received under the grant. The recipient must also submit, upon request, documentation establishing receipt of the grant and setting out the terms and requirements of the particular grant.
(e) Applicability of rules of §§ 117(a) and 117(b). Except where a different rule has been expressly provided in this section, amounts received under Federal grants requiring future service as a Federal employee, and which meet the requirements for exclusion from gross income under this section, are subject to the rules, limitations and definitions specified in §§ 117 (a) and (b) of the Code and §§ 1.117-1 through 1.117-4.
(f) Effective date. Except as provided in paragraph (b) of this section, this section will apply to amounts received after December 31, 1980 under Federal programs which meet the requirements of this section.
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Treas. Reg. §1.117-5(a)In general.
In general. Under section 117(c), amounts received by an individual under a Federal program as a scholarship or grant for qualified tuition and expenses at an institution of higher education are excluded from the gross income of the recipient even though the recipient is required to perform future service as a Federal employee. See paragraph (c) of this section for the definitions of the terms “qualified tuition and expenses” and “institution of higher education.”
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Treas. Reg. §1.117-5(b)Exception for uniformed services scholarship programs.
Exception for uniformed services scholarship programs. The requirements of this section do not apply to amounts received before 1985 by a member of a uniformed service who entered training before 1981 under the Armed Forces Health Professions Scholarship Program, National Public Health Service Corps Scholarship Training Program, or other substantially similar Federal programs requiring the recipient to work for a uniformed Federal service after completion of studies. These awards are governed by section 4 of Pub. L. 93-483 as amended by Pub. L. 95-171, Pub. L. 95-600 and Pub. L. 96-167. See section 101(3) of title 37, United States Code for the definition of the term “uniformed service.”
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Treas. Reg. §1.117-5(c)Definitions—(1) Qualified tuition and related expenses.
Definitions—(1) Qualified tuition and related expenses. For purposes of section 117(c) and this section, qualified tuition and related expenses are those amounts which under the terms of the Federal program are required to be used and in fact are used for payment of:
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Treas. Reg. §1.117-5(d)Records required for exclusion from gross income.
Records required for exclusion from gross income. To exclude amounts received under Federal programs requiring future services as a Federal employee, the recipient must maintain records that establish that the amounts received under such programs were used for qualified tuition and related expenses as defined in paragraph (c)(1) of this section. Qualifying uses may be established by providing to the Service, upon request, copies of relevant bills, receipts, cancelled checks or other convenient documentation or records which clearly reflect the use of the money received under the grant. The recipient must also submit, upon request, documentation establishing receipt of the grant and setting out the terms and requirements of the particular grant.
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Treas. Reg. §1.117-5(e)Applicability of rules of §§ 117(a) and 117(b).
Applicability of rules of §§ 117(a) and 117(b). Except where a different rule has been expressly provided in this section, amounts received under Federal grants requiring future service as a Federal employee, and which meet the requirements for exclusion from gross income under this section, are subject to the rules, limitations and definitions specified in §§ 117 (a) and (b) of the Code and §§ 1.117-1 through 1.117-4.
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Treas. Reg. §1.117-5(f)Effective date.
Effective date. Except as provided in paragraph (b) of this section, this section will apply to amounts received after December 31, 1980 under Federal programs which meet the requirements of this section.
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Treas. Reg. §1.117-5(i)§1.117-5(i)
Admits as regular students only individuals who have a certificate of graduation from a high school or the recognized equivalent of such a certificate;
(ii) Is legally authorized within the state to provide a program of education beyond high school; and
(iii) Provides an education program for which it awards a bachelor's or higher degree or which is acceptable for full credit towards such a degree, or which trains and prepares students for gainful employment in a recognized health profession. For purposes of this section, recognized health professions are those health professions which are supervised or monitored by appropriate state or Federal agencies or governing professional associations and which require members to be currently licensed or certified in order to practice.
(3) Service as a Federal employee—(i) In general. Except as otherwise provided in paragraph (c)(3)(ii) of this section, service as a Federal employee refers to employment of the recipient by the Federal government to work directly for the Federal government. Thus, Federal grants or scholarships which do not require the recipient to work directly for the Federal government are not governed by the rules of this section.
(ii) Service in a health manpower shortage area. For purposes of this section an obligation under a grant for the recipient to serve in a health related field in a health manpower shortage area as designated by the Secretary of Health and Human Services according to the criteria of the Public Health Services Act (42 U.S.C. 254(e)) and the regulations promulgated thereunder (42 CFR 5.1-5.4) will be considered an obligation to serve as a Federal employee.
409 Citing Cases
on.” (Emphasis added.) The sole dispute in this case is whether Dr. Baturin’s compensation from Jefferson Lab is properly characterized as a “grant, allowance, or other similar payment[].” B. Quid pro quo The Fourth’s Circuit’s opinion “look[ed] to I.R.C. § 117[14] and its implementing regulations to inform whether payments are tax-exempt ‘grant[s], allowance[s], or other similar payments’ under Article 18 of the United States-Russia Tax Treaty.” Baturin II, 31 F.4th at 175. Under that section 1
As the closest domestic tax law analog, respondent points us to section 117, which exempts from taxation as a “‘qualified scholarship’ .
Per capita distributions made under the Per Capita Act of 1983 are exempt from Federal and State tax. R sec. 117b(a) (referencing the Act ofOct. 19, 1973, Pub. L. No. 93-134, sec. 7, 87 Stat. at 468). However, not all per capita distributions qualify for the Per Capita Act's tax exemption; the funds must come from approved sources and be
Per capita distributions made under the Per Capita Act of 1983 are exempt from Federal and State tax. R sec. 117b(a) (referencing the Act ofOct. 19, 1973, Pub. L. No. 93-134, sec. 7, 87 Stat. at 468). However, not all per capita distributions qualify for the Per Capita Act's tax exemption; the funds must come from approved sources and be
Section 117(a) provides that "[g]ross income does not include any amounts received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization". To be a "qualified scholarship" the amount received by the individual must be "a scholarship or fellowship grant" used only for "qualified tuition a
Thus, unlike scholarships, some grants may come with "strings", and the term "grant" includes at least some arrangements unlike "scholarships" as described by the Supreme Court in Bingler. Because U.S. tax law does not use or provide a meaning ofthe Treaty phrase at issue, "grant, allowance, or other similar payments", article 3(2) does not direct us to apply U.S. law in construing that phrase. D. Whether Petitioner Was Temporarily Present in the United States for the "Primary Purpose ofStudying
Section 117 Exclusion Gross income includes "all income from whatever source derived". Sec. 61(a). The scope ofsection 61(a) is broad, and exclusions from income are narrowly construed. See Commissioner v. Schleier, 515 U.S. 323, 328 (1995); - 9 - United States v. Burke, 504 U.S. 229, 248 (1992); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 4
at 281. See also Hill, 506 U.S. at 555 n.6 (noting that some - 22 - [*22] ofthe text in section 263(a)(1) has "one ofthe longest lineages ofany provision in the Internal Revenue Code"). 3. Former Section 189 Congress eventually supplemented section 263(a)(1) with former section 189.8 Former section 189, which was added to the Co
For this purpose, the term "tax-free educational assistance" means (1) a qualified scholarship that is excludable from income under section 117; (2) a veterans' or member ofthe armed forces' educational assistance allowance under 4The American Opportunity Tax Credit is a modified version ofthe Hope Scholarship Credit.
at 36. The current regulations governing the contents ofthese information returns were promulgated in June 1971. T.D. 7122, 1971-2 C.B. 393. In 1993, when Congress enacted section 170(f)(8), the requirement that charities file annual information returns on Form 990 was well established and familiar to all concerned. IfCongress ha
at 281. See also Hill, 506 U.S. at 555 n.6 (noting that some - 22 - [*22] ofthe text in section 263(a)(1) has "one ofthe longest lineages ofany provision in the Internal Revenue Code"). 3. Former Section 189 Congress eventually supplemented section 263(a)(1) with former section 189.8 Former section 189, which was added to the Co
at 281. See also Hill, 506 U.S. at 555 n.6 (noting that some - 22 - [*22] ofthe text in section 263(a)(1) has "one ofthe longest lineages ofany provision in the Internal Revenue Code"). 3. Former Section 189 Congress eventually supplemented section 263(a)(1) with former section 189.8 Former section 189, which was added to the Co
te successor liability and the exceptions to the rule are generally applied regardless of whether the predecessor or successor organization was a corporation or some other form of business organization.’” (quoting 63 Am. Jur. 2d, Products Liability, sec. 117 (1984))). A. Application of Federal Common Law Respondent argues that because the uniform imposition and collection of employment taxes is a significant Federal interest, we should disregard State law and adopt the broader parameters of Fede
es. Def. Council, Inc., 467 U.S. 837, 842-843 (1984)); cf. Shea Homes, Inc. & Subs. v. Commissioner, 142 T.C.60, 98 n.18 (2014). Cf. Lawinger v. Commissioner, 103 T.C. 428, 435 (1994) (discussing the definition of “attributable to” in the context of sec. 117(m) of the Internal Revenue Code of 1954 and sec. 108(g)(2)(B) of the Internal Revenue Code of 1986). The Congressional Record reveals that Chairman Rostenkowski of the House Ways and Means Committee, when moving to suspend the rules so that
at 714-715. Moreover, the Senate Fin nce Committee was critical ofthe existing law because it taxed similar economic transactions differently and effectively provided taxpayers with an election to sell the property right ifthe resulting transaction results in a gain or extinguish th property right ifthe resulting transaction resu
at 714-715. Moreover, the Senate Finance Committee was critical of the existing law because it taxed similar economic transactions differently and effectively provided taxpayers with an election to sell the property right if the resulting transaction results in a gain or extinguish the property right if the resulting transaction
d any other fact which tends to indicate whether the sale or transaction was in furtherance of an occupation of the taxpayer. [Friend v. Commissioner, 198 F.2d at 287.]3 3Although these factors evolved in connection with the Court’s consideration of sec. 117 of the 1939 Internal Revenue Code, the statutory language is identical to that of sec. 1221(1), as in effect during the 1998 tax year, and the factors established in Friend v. Commissioner, 198 F.2d 285, 287 (10th Cir. 1952), affg. a Memoran
- 5 - following type of payment is not excludable from income under section 117: any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research, if such amount represents either compensation for past, present, or future employment services or represents payment for services which are subject to the direction or supervision of the grantor. Sec. 1.117-4(c)(1), Income Tax Regs. The Supreme Court has held that: The thrust of the provision [in the section 11
duction - 21 - shall in any case be allowed in respect of the items specified in this part”; i.e., part IX (Items Not Deductible). Section 263 is included in part IX. Section 263(a) provides, in language that dates back to the Revenue Act of 1864, sec. 117, 13 Stat. 282, see United States v. Hill, 506 U.S. 546, 556 n.6 (1993) (“section 263(a)(1) has one of the longest lineages of any provision in the Internal Revenue Code.”), that “No deduction shall be allowed for--(1) Any amount paid out for n
duction - 21 - shall in any case be allowed in respect of the items specified in this part”; i.e., part IX (Items Not Deductible). Section 263 is included in part IX. Section 263(a) provides, in language that dates back to the Revenue Act of 1864, sec. 117, 13 Stat. 282, see United States v. Hill, 506 U.S. 546, 556 n.6 (1993) (“section 263(a)(1) has one of the longest lineages of any provision in the Internal Revenue Code.”), that “No deduction shall be allowed for--(1) Any amount paid out for n
duction - 21 - shall in any case be allowed in respect of the items specified in this part”; i.e., part IX (Items Not Deductible). Section 263 is included in part IX. Section 263(a) provides, in language that dates back to the Revenue Act of 1864, sec. 117, 13 Stat. 282, see United States v. Hill, 506 U.S. 546, 556 n.6 (1993) (“section 263(a)(1) has one of the longest lineages of any provision in the Internal Revenue Code.”), that “No deduction shall be allowed for--(1) Any amount paid out for n
fy for 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the year in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. -- 22 -- exemption as a qualified scholarship under section 117. Petitioners resided in Owings Mills, Maryland, when the petition was filed. The facts may be summarized as follows. Michael B. Streiff (petitioner) is a medical doctor. During 1993, petitioner was engaged in a program at Johns Hopkins Univ
Petitioner originally contended that section 117 excluded the Globe payment from income.
Even if the payments under the agreement do not constitute repayment of student loans, respondent argues they are repayments of a qualified scholarship under section 117, meaning that interest payments incurred during repayment are not deductible because they are directly related to the production of tax-exempt income and are subject to the nondeductibility limitations of section 265.
t considered wages under the Internal Revenue Code, and, therefore, petitioner was not an employee of NUS. Petitioners do not cite any case law or statute to support this position. We believe, however, that petitioners have in mind the provisions of section 117. Section 117(a) excludes from gross income "any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii)". The term "qualified scholar
er, supra; Wood v. Commissioner, supra. By adding the phrase "to customers", Congress intended to make it - 11 - "impossible to contend that a stock speculator trading on his own account is not subject to the [capital loss limitation] provisions of section 117." H. Conf. Rept. 1385, 73d Cong., 2d Sess. (1934), 1939-1 C.B. (Part 2) 627, 632. Given its clearly stated purpose, this Court and others have used the "to customers" requirement to distinguish between securities "dealers" who are intended
return and then deducted the same amount on line 22 of the return to arrive at their total income for the year. Petitioner contends that the $15,846 (rounded) he received from the University in 1992 was a "stipend" excludable from income pursuant to section 117. In particular, petitioner posits the following: Code Section 117 changed effective August 17, 1986, but Proposed Regulation 1.117-6(f)(3) provides that in the event a person is receiving a stipend prior to August 17, 1986 and continuousl
The issues for our consideration are whether amounts received by petitioner qualify as a fellowship grant excludable from income under section 117 and whether petitioner is liable for the additions to tax stated above.
Because section 402(e)(4)(C) requires that we treat the Retirement System and the Pension System as a single pension plan, we conclude that, by transferring from the Retirement System to the Pension System, petitioner did not forfeit his right to a future monthly annuity, but simply elected to receive an initial single payment t
1993-322, the Sixth Circuit Court of Appeals began its inquiry into the Treasury’s interpretation of section 117 with the following statement: The degree of deference to be accorded an agency’s interpretation of a statute Congress has charged it with administering varies, depending on several factors, including the existence of a statute mandating a standard of review, the form and formality of the interpretation, and the consistency of the agency