REVENUE CANADA TAXATION 
 
INTERPRETATION BULLETIN 
 
NUMBER: IT-340R 
 
DATE: September 26, 1984 
 
SUBJECT: INCOME TAX ACT 
Scholarships, Fellowships, Bursaries, and Research Grants - Forgivable Loans, 
Repayable Awards and Repayable Employment Income 
 
REFERENCE: Paragraph 60(g) also paragraphs 8(1)(n), 56(1)(n), 56(1)(o)and 
56(1)(p) 
 
This bulletin replaces and cancels IT-340 dated August 23, 1976. Current 
revisions are indicated by vertical lines. 
 
1. Paragraph 56(1)(n) brings into income for a taxation year amounts(other 
than amounts received out of a registered education savings plan) received as 
scholarships, fellowships, bursaries, and some prizes, to the extent that the 
total amount of these awards received in the year exceeds $500. Research 
grants are included in computing income virtue of paragraph 56(1)(o) to the 
extent that they exceed the aggregate of allowable expenses incurred in the 
year. IT-75R2, "Scholarship, Fellowships, Bursaries, Prizes and Research 
Grants", contains general comments on the payments included in income under 
these two paragraphs of the Act. This bulletin deals specifically with such 
awards and grants where they are in the form of forgivable loans or repayable 
amounts. 
 
2. In this bulletin, 
(a) a "forgivable loan" is a loan which is made to enable the borrower to 
pursue an education or to carry out a research project and which the lender is 
committed to forgive if certain conditions are met by the borrower, and 
(b) a "repayable award" is a scholarship, fellowship, bursary or research 
grant which the recipient is committed to return if certain conditions are not 
met. 
 
3. In order to determine whether an amount is a forgivable loan or a repayable 
award, the rights and obligations flowing from the agreement between the 
grantor and the recipient must be examined. If the agreement under which an 
amount is paid gives rise at the time of payment to an enforceable debt, it is 
the Department's view that the amount is a loan. If the agreement specifies 
that the amount paid does not become a debt of the recipient unless the 
recipient fails to fulfil certain conditions, the amount is generally 
considered to be a repayable award. 
 
FORGIVABLE LOANS 
 
4. It is considered that a bona fide loan, whether forgivable or not, does not 
come within the terms "scholarship", "fellowship", "bursary" or "research 
grant" as used in paragraph 56(1)(n) or (o) of the Act. 
 
5. Where an employee receives a forgivable loan from an employer on condition 
that the employee return to employment with the employer upon completion of 
the period of education (or the research project) for which the loan was 
given, the amount received as a loan generally is not income when received. If 
the loan (or part of the loan) is subsequently forgiven for the reason that 
the employment conditions are met, the amount forgiven constitutes employment 
income of the employee in the year of forgiveness under paragraph 6(1)(a) of 
the Act. 
 
6. Similarly, where a taxpayer receives a forgivable loan from a person who is 
not the taxpayer's employer when the loan is made but who is not the 
taxpayer's employer when the loan is made but who is the employer at the time 
of forgiveness, any amount forgiven because the employment conditions are met 
is employment income of the taxpayer in the year of forgiveness under 
paragraph 6(1)(a). 
 
7. Where a forgivable loan has been taxed under subsection 15(2) in the hands 
of a shareholder, a subsequent forgiveness is not considered to be employment 
income even though the shareholder is also an employee at the time of 
forgiveness. 
 
REPAYABLE AWARDS 
 
8. Repayable awards are included in computing the recipient's income in the 
year received under paragraph 56(1)(n) or (o). 
 
9. Where a taxpayer, during or immediately after employment by an employer, 
makes an agreement by which the employer will pay for the taxpayer's education 
on condition that the taxpayer return to employment with the employer after 
the course, the amounts so paid are employment income to the taxpayer under 
subsection 5(1) pursuant to subsection 6(3), whether or not the taxpayer is 
committed to repay the employer if the employment conditions are not met. Such 
amounts are not awards within the meaning of this bulletin, and thus are not 
subject to the rules in paragraphs 56(1)(n) or (o). Consequently, the $500 
exemption in paragraph 56(l)(n) is not applicable to such amounts and no 
research expenses are deductible from such amounts. 
 
10. Where a taxpayer repays part or all of an amount of a repayable award, the 
amount repaid is deductible in computing the taxpayer's income of the year of 
repayment, by virtue of paragraph 60(q), provided that all of the following 
conditions are met: 
 
(a) the taxpayer is an individual dealing at arm's length with the person to 
whom the amount was repaid (such person is referred to as the "payer" in 
paragraph 60(q); 
 
(b) the amount repaid was included in computing the taxpayer's income in a 
previous year as 
(i) an amount described in paragraph 56(1)(n) (meaning, the net amount of the 
award after the deduction of the $500 - see 1 above), or 
(ii) an amount described in paragraph 56(1)(o) (meaning the amount by which 
the research grant received exceeds the relevant expenses); 
 
(c) the taxpayer is required to repay the amount to the payer as a result of 
the taxpayer's failure to fulfil a condition stipulated at the time the award 
was received; 
 
(d) during the period for which an amount in (b)(i) or (ii) above was paid, 
the taxpayer did not provide services, other than occasional services, to the 
payer as an officer or under a contract of employment; and 
 
(e) the amount was paid to the taxpayer to assist in furthering the taxpayer's 
education. 
 
11. As noted in 10(b) above, the deduction under paragraph 60(q) of the Act is 
allowed only if the amount repaid was included in computing the taxpayer's 
income in a previous year. If an amount is received and repaid in the same 
year, it is the Department's view that the amount of the award should be 
excluded from income to the extent that it was repaid in the year. 
 
12. Prior to 1981, where an amount paid to a taxpayer in circumstances 
described in 9 above was included in the taxpayer's income from employment 
under subsection 5(1), any subsequent repayment (prior to 1981) of all or part 
of the amount was deductible under paragraph 60(q) provided that all of the 
conditions described in 10(a) and 10(c) to (e) above were met. Where amounts 
received by a taxpayer as described in 9 above have been repaid after 1980, by 
or on behalf of the taxpayer, the repayment is deductible under paragraph 
8(1)(n) if the following conditions are met: 
 
(a) the repayment is pursuant to an arrangement requiring reimbursement of any 
amounts received for a period throughout which the taxpayer did not perform 
duties of the office or employment; 
(b) the amounts received were included in computing the taxpayer's employment 
income; and 
(c) the total of reimbursements did not exceed the total of the amounts 
received for the period referred to in (a) above. 
 
13. A repayment of a repayable award as explained in 10 above which is 
deductible by the taxpayer under paragraph 60(q) or a repayment of employment 
income as explained in 12 above which is deductible by the taxpayer under 
paragraph 8(1)(n) is to be brought into the income of the recipient.