Rev. Rul. 57-286

Advice has been requested regarding the treatment under the Internal Revenue Code of 1939 of certain scholarships and fellowship grants.

The Internal Revenue Code of 1939 contains no provisions concerning the taxable status of scholarships and fellowship grants. However, section 22(b)(3) thereof excludes from gross income amounts received as gifts. It was held in I. T. 4056, C. B. 1951-2, 8, that certain fellowship grants made by the M foundation were not exempt from Federal income tax as gifts under section 22(b)(3) of the 1939 Code, but that the amount of any such fellowship grant was includible in the recipient's gross income. In the case of George Winchester Stone, Jr., et ux. v. Commissioner, 23 T. C. 254, acquiescence page 9, this Bulletin, the Tax Court of the United States held that the amount of $1,000 received by the petitioner in 1950 from the John Simon Guggenheim Memorial Foundation as part of a fellowship grant was a gift and therefore excludable from gross income under section 22(b)(3).

In view of the Commissioner's acquiescence in the decision in the Stone case, supra, fellowship grants made by the John Simon Guggenheim Memorial Foundation and grants generally similar thereto will not be required by the Internal Revenue Service to be included in gross income for taxable years governed by the 1939 Code. Whether or not fellowship grants other than those from the John Simon Guggenheim Memorial Foundation paid during such taxable years constituted gross income or gifts excludable from gross income under section 22(b)(3) of the 1939 Code will depend upon consideration of all the facts in each case.

Fellowship grants made for taxable years governed by the internal Revenue Code of 1954 will be controlled by section 117 thereof which provides rules for determining the extent to which amounts received as scholarships or fellowship grants are to be excluded from the recipients' gross income.