Rev. Proc. 68-11

SECTION 1. PURPOSE.

.01 This Revenue Procedure sets forth instructions to taxpayers relating to requests for rulings or determination letters concerning whether amounts received for study or research are excludable from gross income as scholarships or fellowship grants under the provisions of section 117 of the Internal Revenue Code of 1954.

SEC. 2. BACKGROUND.

.01 Subject to certain limitations, section 117 of the Code provides that gross income of an individual does not include any amount received as a scholarship at an educational institution or as a fellowship grant.

.02 Section 1.117-4 of the Income Tax Regulations provides, in pertiment part, that 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 of the Code if the primary purpose of this study or research is to further the education and training of the recipient in his individual capacity and if the amount provided by the grantor for such purpose does not represent compensation or payment for services.

.03 A more detailed explanation of the statutory requirements, including certain limitations regarding individuals who are not candidates for a degree, may be found in the annual publication of Your Federal Income Tax , a copy of which is available at a nominal cost at Internal Revenue offices or from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

.04 Revenue Procedure 67-1, C.B. 1967-1, 544, describes the general procedures to be followed by taxpayers seeking ruling and determination letters from the Internal Revenue Service. These procedures were established in order to promote the most efficient handling of a taxpayer's request. Section 6 of Revenue Procedure 67-1 provides general instructions to taxpayers concerning the submission of requests for rulings and determination letters. However, experience has indicated that as to requests relating to section 117 of the Code, supplemental instructions are needed to avoid unnecessary correspondence between the Service and taxpayers since a large number of requests do not contain sufficient information.

SEC. 3. REQUESTS FOR RULINGS OR DETERMINATION LETTERS.

.01 Taxpayers in doubt concerning the proper treatment of amounts received for study or research may submit inquiries to the Service. However, it is necessary that each such inquiry contains information in sufficient detail to enable the Service to issue a specific ruling or determination letter. Statements to the effect that the sole purpose of a grant is to further the education and training of the recipient are in the nature of conclusion which are not meaningful unless supported by sufficient explanations to justify such conclusions.

.02 A request which does not comply with the instructions contained in this Revenue Procedure will be acknowledged indicating which of these instructions have not been followed.

SEC. 4. INSTRUCTIONS TO TAXPAYERS.

.01 If payments have not commenced under a grant awarded an individual, or if payments have been received in a year for which a Federal income tax return has not been filed, the taxpayer may submit a request to the Commissioner of Internal Revenue, Washington, D.C. 20224. In all other cases requests should be directed to the District Director of Internal Revenue for the district with which the tax return of the taxpayer has been filed or is required to be filed.

.02 In accordance with general instructions contained in Revenue Procedure 67-1, the request should include complete information concerning the grant and copies of all pertinent documents. While the material submitted may vary depending on the nature of the grant, in the usual case it should include: (1) the names, addresses, and taxpayer identifying numbers of all interested parties; (2) a copy of the application for the grant; (3) a copy of the grant or agreement under which the recipient receives payment; and (4) the terms and conditions subject to which the grant is paid.

.03 When the individual is required to engaged in teaching, research, or some other activity as a condition to receiving the grant, the required activity should be identified and fully described. Such an activity may include practice teaching, research, and work or training experience such as might be required of a medical technologist or an intern in the individual's particular field of study. In such cases the documents and information submitted should include a schedule of the recipient's programmed activities and a description of these activities in sufficient detail to indicate the usefulness to the grantor or the organization for whom they are performed and the conditions under which they are performed, including the degree of supervision. If the organization with whom the recipient is engaging in activities, for which he receives a grant, has employees who engage in similar activities, the information submitted should include a brief description of the similarities and differences between these respective activities and the conditions under which these activities are performed.

.04 If the request is submitted by or on behalf of an individual who is a candidate for a degree, the information submitted should set forth or include an official copy of the degree requirements which identifies the teaching, research, or other activities specifically required of all degree candidates as a condition to receiving this degree. If the recipient is required to engaged in an activity as a condition to receiving the grant, the information submitted under .03 above should describe how the educational institution participates in the development and supervision of the required activity and whether academic credit is received for its performance.

.05 If the request is submitted by or on behalf of an individual who is not a candidate for a degree, and the recipient has received a grant as a non-degree candidate in previous years, his request should also state: (1) the years in which grants were received; (2) the periods covered by the grants; and (3) the amounts received.

.06 If the request involves an organization supplying funds to another organization from which grants are paid, the information submitted should include a copy of the agreement and any other pertinent documents under which funds are made available to the payor and the terms and conditions for their disbursement. The information submitted should also indicate whether the recipients are candidates for a degree.

.07 Taxpayers desiring to retain original documents are advised to submit copies of such documents since those submitted become part of the Service file and may not be returned.

.08 If the taxpayer is contending for a particular determination, he must furnish an explanation of the grounds for his contentions, together with a statement of relevant authorities in support of his views. See section 6.03 of Rev. Proc. 67-1.

.09 When a taxpayer receives a determination letter or a ruling prior to the filing of his return he should attach to his return the determination letter or ruling (or a copy thereof) with respect to any transaction which has been consummated and which is relevant to the return being filed.