Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 73-88

1973-1 C.B. 52

Sec. 117

IRS Headnote

Amounts received by a graduate student under an Andrew Mellon Fellowship grant to enable the recipient to devote full time to obtaining a Ph.D. degree are excludable from gross income as a scholarship or fellowship grant.

Full Text

Rev. Rul. 73-88

Advice has been requested whether, under the circumstances described below, amounts paid under an Andrew Mellon Fellowship grant by the A. W. Mellon Educational and Charitable Trust, an organization exempt from Federal income tax under section 501(c)(3) of the Internal Revenue Code of 1954, are excludable from a recipient's gross income under the provisions of section 117(a) of the Code.

The taxpayer, a graduate student enrolled in a program leading to a Ph.D. degree, received an Andrew Mellon Fellowship. Preference in awarding the Fellowship is given to an applicant who studies in the fields of humanities, social sciences, natural sciences, and related fields. The awards are made each year to students of exceptional ability and promise as evidenced by previous academic work, letters of recommendation, scores on the Graduate Record Examination or similar tests, and any other materials that would seem to give promise of distinguished achievement in graduate studies. Recipients are required to devote full time to completing degree requirements during the period of the fellowship and are specifically prohibited from teaching, research, or other outside activities.

The recipient of an award may receive support for a maximum of three academic years or for such shorter period as needed to complete a doctoral program. To obtain a renewal, the recipient must file a written request and have evaluations of his progress submitted in support of his application. Demonstrated superior performance qualifies the recipient for the additional support.

Section 61 of the Code provides that, unless otherwise excluded by law, gross income means all income from whatever source derived including, but not limited to, compensation for services.

Subject to certain qualifications and limitations, section 117(a) of the Code and section 1.117-1 of the Income Tax Regulations provide that gross income of an individual does not include any amount received as a scholarship at an educational institution or as a fellowship grant.

Whether an amount received by an individual is excludable from gross income under section 117 of the Code depends upon the facts and circumstances under which the payment is made. The exclusion provision applies only to scholarship or fellowship grants. A scholarship or fellowship grant is an amount paid or allowed to an individual for the primary purpose of furthering the education and training of the recipient in his individual capacity.

Section 1.117-4(c) of the regulations provides, in pertinent part, that any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research shall not be considered to be an amount received as a scholarship or fellowship grant if such amount represents compensation for past, present or future employment services, if such amount represents payment for services which are subject to the direction or supervision of the grantor, or if such studies or research are primarily for the benefit of the grantor. Any of these conditions will negate the existence of a scholarship or fellowship grant as defined in these regulations.

In the instant case, the amounts received by the taxpayer under the Andrew Mellon Fellowship are for the primary purpose of enabling the taxpayer to further his education and training in his individual capacity. Accordingly, the amounts received are excludable from gross income as a scholarship or fellowship grant under section 117(a) of the Code.