Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 59-92

1959-1 C.B. 11

Sec. 61

IRS Headnote

The entire amount of a grant made to an individual as principal investigator and administrator of a research program, which he expended as required by the grantor to cover the costs connected with the investigations and from which he received no salary or other economic benefit, is not required to be included in his gross income for Federal income tax purposes.

Full Text

Rev. Rul. 59-92

Advice has been requested whether funds granted to an individual to pay the costs connected with a research program are includible in his gross income for Federal income tax purposes.

The taxpayer, who is the chief pathologist and a member of the staff of a certain hospital, applied for and received from the local county heart association, an organization exempt from Federal income taxes, a research grant made specifically to pay the costs of conducting specific investigations in the field of pathology. Under the terms of the grant, the work on the project was to be done in the hospital laboratory; the taxpayer was designated the principal investigator for the project; and the funds granted to him were to be expended for the salary of a part-time laboratory technician and for certain supplies and equipment, with any unexpended portion to be returned to the grantor. Title to any permanent equipment purchased with such funds remained in the grantor. The taxpayer, under the terms of the grant, did not receive any salary or other economic benefit from the funds granted to him.

Gross income, as defined in section 61 of the Internal Revenue Code of 1954, means all income from whatever source derived, unless exempt from tax by law. However, where a taxpayer receives funds burdened with an obligation to be expended for a specific purpose and earmarked for such purpose, the funds so held do not constitute gain or income to the taxpayer.

In the instant case, the taxpayer clearly did not receive the funds granted as his own property. He was burdened with the obligation to use them for the purposes and in the manner set forth in the terms of the grant.

Accordingly, the entire amount of a grant made to an individual as principal investigator and administrator of a research program, which he expended as required by the grantor to cover the costs connected with the investigations and from which he received no salary or other economic benefit, is not includible in his gross income for Federal income tax purposes. No determination is made on the facts submitted with respect to the taxability of the amounts paid to the part-time laboratory technician.