Income Tax Severed Letters

Principal Issues: 1) What is the tax treatment of reimbursements received by medical students to partially cover their transportation and accommodations costs when they choose to take elective courses in remote underserved communities? 2) What is the tax treatment of travel and accommodation reimbursements received by medical residents to partially cover their transportation and accommodations costs when they choose to do their practical training in remote underserved communities?

Position: 1) The reimbursements are in the nature of a scholarship or bursary to be included in income under paragraph 56(1)(n), subject to the scholarship exemption under subsection 56(3). 2) The reimbursements are in the nature of earnings supplements to be included in income under subparagraph 56(1)(r)(i) of the Act.

Reasons: 1) The reimbursements assist medical students in pursuing their education. As per paragraph 3.9 of Income Tax Folio S1-F2-C3, if a scholarship program provides reimbursements to pay for such things as lodging or personal travel, the reimbursed amounts would fall within the scope of subparagraph 56(1)(n)(i). 2) In the present case, the reimbursements provide an incentive for medical residents to obtain employment in remote underserviced areas. Therefore, subparagraph 56(1)(r)(i) appears to be the more specific provision that supersedes the general employment provisions in section 6 of the Act.