2019-0802051E5 Scholarships

Principal Issues: Whether amounts paid to students in general interest music lessons and classes are considered scholarships or bursaries as contemplated by paragraph 56(1)(n).

Position: No.

Reasons: They are not paid to enable a student to pursue their education.

Author: Brennan, Christopher
Section: 56(1)(n)

XXXXXXXXXX                                                                  2019-080205

July 30, 2019

Dear XXXXXXXXXX

Re: Scholarships and bursaries for recreational music lessons

This is in reply to your letter of March 22, 2019 where you inquire whether scholarships and bursaries given to students, by the XXXXXXXXXX (the “Conservatory”), for music lessons would be taxable to the students.

Our understanding is that the Conservatory has an endowment fund that provides scholarships and bursaries to students of all ages to take the Conservatory’s private or group music classes.  These classes are recreational in nature and are not considered post-secondary or public education, and do not result in any degrees, diplomas or other certificate of graduation.  These scholarships and bursaries (“recreational bursaries”) provide students with XXXXXXXXXX% off the fees paid for these classes during an academic year.

This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”) and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Amounts received as or on account of a scholarship, bursary, fellowship or prize for achievement are included in income under paragraph 56(1)(n) of the Act to the extent that the amount exceeds the participant’s scholarship exemption for the year.  Although the term bursary is not defined in the Act, it has been a long-standing position of the Canada Revenue Agency (“CRA”) that the definition of bursary is broad enough to encompass almost any form of financial assistance, including a grant, which enables a student to pursue his or her education.

Scholarships and bursaries usually apply to education at a post-secondary level or beyond, such as at a university, college, technical institute or other educational institution. However, there are circumstances where scholarships or bursaries are awarded for education below the post-secondary school level. Scholarships and bursaries normally assist the student in proceeding towards a degree, diploma, or other certificate of graduation.

It is our view that the recreational bursaries, given by the Conservatory to students for the recreational music lessons, are not for the purpose of enabling the students to pursue their education. Therefore, the recreational bursaries would not be included in the income of the student as a scholarship or bursary pursuant to paragraph 56(1)(n) of the Act or included in the student’s income under any other provision of the Act. In addition, the recreational bursaries would not have to be reported on a T4A, Statement of Pension, Retirement, Annuity, and Other Income.

I trust the information I have provided is helpful.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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