Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 59-81

1959-1 C.B. 37

Sec. 117

IRS Headnote

The entire amount of a grant received by an individual to cover expenses for travel and study in  a foreign country, is considered as received incident to a fellowship grant where the recipient is not a candidate for a degree and the grant is from a tax exempt organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1954. The amount received is excludable from the gross income of the recipient to the extent expended subject only to the 36-months limitation period provided in section 117(b)(2)(B) of the Code.

Full Text

Rev. Rul. 59-81

Advice has been requested whether a grant received by a taxpayer from a tax-exempt organization, covering only his expenses for travel, including meals and lodging, while in a foreign country for research and study, is excludable from his gross income as a fellowship grant under section 117 of the Internal Revenue Code of 1954.

The taxpayer, a language professor at a university, applied to an educational foundation for a cash grant to enable him to visit a foreign country for a period of three months for the purpose of doing some specific research and study pertaining to the language of such country. In his application for the grant, the taxpayer estimated his expenses for a round trip airplane ticket to the foreign country, his expenses for travel, meals, and lodging and for train fare required during the trip. The amount was specifically designated to cover only the travel expenses specified above and was made subject to the condition that any amount not expended as indicated in his application would be returned to the grantor; that a complete accounting of his expenditures be made to the university with which he was affiliated; and that he submit a brief report of his trip to the grantor upon his return to the United States. The taxpayer was not a candidate for a degree and the grantor was a tax exempt organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1954.

Section 117(a) of the Code provides that gross income does not include (1) any amount received as a fellowship grant and (2) any amount received and expended to cover expenses of travel which are incident to such fellowship grant. In order to be excludable as an amount received and expended to cover expenses for travel (including meals and lodging while traveling) incident to a fellowship grant, section 1.117-1(b) of the Income Tax Regulations provides that the amount must be specifically designated to cover such expenses.

In the case of a taxpayer not a candidate for a degree, section 117(b)(2)(B) of the Code provides that no exclusion shall be allowed under subparagraph (a) after the recipient has been entitled to exclude amounts received as a fellowship grant for a period of 36 months, whether or not consecutive.

A fellowship grant is defined in section 1.117-3(c) of the Income Tax Regulations as an amount paid or allowed to or for the benefit of an individual to aid him in the pursuit of study or research.

In the instant case, the grant was specifically designated for travel expenses to enable the taxpayer to visit the foreign country and conduct his research and study of its language. Thus, the requirements of section 117 of the Code and the Income Tax Regulations thereunder are satisfied.

Accordingly, in the instant case, the entire amount of the grant is considered as received incident to a fellowship grant and is excludable from the gross income of the recipient to the extent so expended, subject only to the 36-month limitation period provided in section 117(b)(2)(B) of the Code.