7 November 2025 External T.I. 2024-1044451E5 - Directed Scholarship and subsection 168(1)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Is a directed disbursement by a registered charity to a qualified done for a scholarship to a particular individual considered a gift from the registered charity?

Position: The determination of a gift is a question of fact. A scholarship is not a gift.

Reasons: See comments herein.

XXXXXXXXXX									2024-104445
										Karri Lea Estabrooks

November 7, 2025

Dear XXXXXXXXXX;

Subject: Directed Scholarship and subsection 168(1).

We are writing in response to your correspondence of November 24, 2024, where you requested our comments on paragraph 168(1)(f) of the Income Tax Act (Act). We apologize for the delay of our response.

Briefly, in your correspondence you describe a situation whereby a registered charity (Donor) transfers funds to another registered charity (Qualified Donee) on the condition the Qualified Donee use the funds to provide a scholarship to a particular individual who is not a qualified donee. You have asked the following questions regarding subsection 168(1) of the Act to the described situation:

1. Would the CRA be of the view that a delivery of funds from one charity to another charity, on the condition that the funds be provided to a particular individual as a scholarship, be considered a gift so as to trigger the application of 168(1)(f) of the Act?

2. Would the provision of a scholarship in pursuit of a charity’s charitable objects be considered a gift for purposes of paragraph 168(1)(b) of the Act?

3. In the case that the scholarship funds were considered by CRA to be a gift, but the Qualified Donee had control over how the scholarship was disbursed and who it was disbursed to, would the Qualified Donee have sufficient control such that 168(1)(f) of the Act would not be triggered?

Our Comments

This technical interpretation provides general comments about the provisions of the 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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Gift

The term “gift” is not defined in the Act, and therefore, it is necessary to refer to the applicable common or civil law for its meaning. Generally, under common law, a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor. In order for a transfer to be considered voluntary, there must be no obligation to make such a transfer. Generally, in the true sense of a gift, a donee must have an unfettered right to use the funds. However, a transfer of funds subject to a general direction from the donor that the funds be used in a particular program operated by the donee can be considered a gift, provided that no benefit accrues to the donor, the directed funds do not benefit any person not dealing at arm’s length with the donor, and decisions regarding utilization of the funds within a program rest with the donee.

Information on gifts is available Income Tax Folio S7-F1-C1: Split-receipting and Deemed Fair Market Value.

Charitable purposes – scholarships

The advancement of education is generally recognized as a charitable purpose. In this regard, the advancement of education can include purposes that educate by training that provides knowledge or develops abilities. The courts have also recognized certain other purposes that advance education and includes providing scholarships to students. The term “scholarship” is not defined in the Act, however, it is our general understanding that a scholarship is an award consisting of financial support and other benefits granted to a student at a school, college, or university, usually as a reward for academic or other achievement. In our view, the awarding of a scholarship would not be considered a gift at law.

Generally, 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 recipient’s scholarship exemption for the year.

Further information on scholarships in the charitable context is available in Charities Guidance, CG-030, Advancement of Education and Charitable Purposes. In addition, information on the taxation of scholarships is available Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance.

Revocation of charitable registration

In general terms, under the Act, a charity may be subject to revocation of its registered status if, among other things, the charity,

(a) fails to expend amounts in any taxation year, on charitable activities carried on by the charity and by way of gifts made by it that are qualifying disbursements, the total of which is at least equal to the charity’s disbursement quota for that year;

(b) makes a disbursement, other than

(i) a disbursement made in the course of charitable activities carried on by it, or

(ii) a qualifying disbursement;

(c) ceases to comply with the requirements of the Act for its registration;

(d) issued a receipt for a gift otherwise than in accordance with the Act and the Income Tax Regulations or that contains false information; or

(e) accepts a gift the granting of which was expressly or implicitly conditional on the charity making a gift to another person, club, society, association or organization other than a qualified donee.

A “qualifying disbursement” of a charity is defined in subsection 149.1(1) of the Act and includes a disbursement by way of gift to a qualified donee.

Whether a particular charity would be subject to revocation pursuant to subsection 168(1) of the Act can only be made upon a complete examination of all the facts on a case-by-case basis.

We trust that these comments will be of assistance.

Yours truly,

Bob Naufal
Manager
Financial Institutions Section
For Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch