Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 66-83

1966-1 C.B. 30

Sec. 61

Sec. 117

IRS Headnote

Stipends paid to an intern performing services for a social service agency, out of funds received by the agency from a foundation to finance an intern training program, are compensation for services rendered even though he is acquiring training and experience in the field of social work. Therefore, such stipends are includible in the gross income of the recipient under section 61 of the Internal Revenue Code of 1954 and not excludable as fellowship grants under section 117 of the Code.

Full Text

Rev. Rul. 66-83

Advice has been requested whether, under the circumstances described below, the stipends received by an intern of a social service agency are taxable to the recipient, or whether such amounts are excludable from gross income as fellowship grants.

A social service agency has received a grant from a foundation to provide funds for a training program for an intern in the field of community organization and intergroup relations. One purpose of the internship program is to provide the agency with additional staff members at no additional cost to the agency.

The taxpayer in the instant case was selected to serve a 1-year internship. He spends at least one-half of each day in `work experience' under the supervision of the regular staff of the agency, which work experience consists of normal work of the agency. The remainder of the day is spent in study, conferences, and report writing. With the exception of the salary scale, the taxpayer is subject to all the provisions of the rules regulating the agency's professional staff.

Section 117(a)(1)(B) of the Internal Revenue Code of 1954 excludes from gross income amounts received as fellowship grants. A fellowship grant as defined by section 1.117-3(c) of the Income Tax Regulations generally means an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research. Section 1.117-4(c) of the regulations provides, in part, that amounts paid to an individual as compensation for past, present, or future employment services are not considered as fellowship grants for the purpose of section 117 of the Code.

Section 61(a) of the Code requires inclusion in gross income of all amounts received as compensation for services, including fees, commissions, and similar items.

Under the circumstances described above the intern is primarily performing services for the social service agency even though in the process he is acquiring training and experience in the field of community organization and intergroup relations. See Rev. Rul. 64-212, C.B. 1964-2, 39, and Rev. Rul. 64-213, C.B. 1964-2, 40. Therefore, stipends received by the taxpayer represent compensation for services rendered to the agency and are not amounts received as fellowship grants within the meaning of section 117 of the Code.

Accordingly, the stipends received by the taxpayer during the period of intership are includible in his gross income under section 61(a) of the Code and are not excludable as feoowship grants under section 117 of the Code.