Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 72-70

1972-1 C.B. 39

Sec. 117

IRS Headnote

Amounts received under a grant by a participant in a post-doctoral program leading to certification and authorization to practice psycho-analysis are excludable from gross income to the extent provided in section 117(b)(2) of the Code.

Full Text

Rev. Rul. 72-70

Advice has been requested whether, under the circumstances described below, a taxpayer is considered a "candidate for a degree" within the provisions of section 117 of the Internal Revenue Code of 1954.

The taxpayer, who possessed a Ph. D. degree in psychology, accepted a grant from an educational institution as defined in section 151(e)(4) of the Code to pursue a four-year study program in psychoanalysis at such educational institution. Upon his successful completion of the program he was awarded a certificate authorizing him to practice in the field of psychoanalysis.

Subject to certain limitations and qualifications, section 117(a) 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.

Section 117(b)(2) of the Code provides, in part, in the case of an individual who is not a candidate for a degree that the amount of the scholarship or fellowship grant excluded under subsection (a) in any taxable year shall be limited to an amount equal to $300 times the number of months for which the recipient received amounts under the scholarship or fellowship grant during such taxable year. This is a lifetime exclusion limited to a total of 36 months.

Section 1.117-3(e) of the Income Tax Regulations defines the term "candidate for a degree" as meaning an individual, whether an undergraduate or a graduate, who is pursuing studies or conducting research to meet the requirements for an academic or professional degree conferred by colleges or universities. A student who receives a scholarship for study at a secondary school or other educational institution is considered to be a "candidate for a degree".

As used in section 1.117-3(e) of the regulations, the term "other educational institution" means an institution of the same kind, class, or nature as a secondary school. Secondary schools, such as high schools and other schools below the college level, do not grant degrees but do award certificates upon completion of certain curricula. However, a student in a secondary school is considered to be a candidate for a degree since the subjects taught in such schools are generally required prior to entry into an educational institution where the student can become a candidate for a degree.

The legislative history of section 117 indicates that recipients of post-doctoral fellowships should not be considered degree candidates. See Senate Report No. 1622, Eighty-third Congress, pages 18, and 189-190. Section 1.117-2(b)(3) of the regulations, moreover, gives examples in which recipients of "post-doctoral fellowships" are not considered candidates for degrees.

In Harry F. Wrobleski v. Bingler, 161 F. Supp. 901 (1958) a taxpayer who was a participating graduate physician in a training program in psychiatry at a psychiatric institute was held not to be a candidate for a degree even though the object of the recipient in participating was to secure certification in Psychiatry by the American Board of Psychiatry and Neurology. See also Joseph D. Woddail, et al., v. Commissioner, 321 F. 2d 721 (1963) and Ethel M. Bonn v. Commissioner, 34 T.C. 64 (1960).

In the instant case, the taxpayer was engaged in a post-doctoral program to qualify him for certification to practice psychoanalysis that did not qualify him as a candidate for a degree under section 117 of the Code. Accordingly, the amounts received by the taxpayer are excludable from his gross income but only to the extent such amounts do not exceed the limitations under section 117(b)(2) of the Code.