Tax Type
Individual Income Tax
Description
Educational grants
Topic
Taxable Income
Date Issued
09-21-1990
September 21, 1990
Re: Ruling Request: Individual Income Tax
Fullbright Grant Payable in Nonconvertible
Foreign Currency
Dear********************
This will reply to your recent letter requesting a ruling on the taxability of a Fullbright grant which you (the "Taxpayer) are about to receive for study in India.
FACTS
The taxpayer, a Virginia resident, will be studying in India under a Fullbright grant for an eight month period beginning in September 1990. Eighty percent of the grant is payable in non-convertible rupees. The taxpayer wishes to know if the grant will be taxable in Virginia, and if so, whether tax will be payable in U.S. currency or in Indian rupees.
DISCUSSION
As provided under Internal Revenue Ruling 61-65 (enclosed), generally, amounts received for study and research abroad, under the Fullbright Act and the United States Information and Educational Exchange Act of 1948, by United States citizens are scholarship or fellowship grants. Under Internal Revenue Code 117, any amount received as a qualified scholarship by an individual who is a candidate for a degree at a qualified educational organization, which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance where its educational activities are regularly carried on, is excluded from that individual's gross income .
On the other hand, amounts paid under the Fullbright Act to United States citizens for lecturing or teaching abroad are compensation for services rendered and are includible in their gross incomes.
Assuming that the grant is taxable income, (the taxpayer states that it is subject to federal tax), a United States citizen receiving income in a foreign currency must report such income in U. S. dollars, using the rate of exchange in effect at the time it was received or, if there is more than one rate of exchange in use, a rate of exchange that will most clearly reflect the taxpayer's income. (see enclosed Rev. Rul. 64-307).
In some cases, as provided in the enclosed Rev. Rul. 74-351, actual payment of U. S. income tax may be deferred when the taxpayer is the recipient of nonconvertible foreign currency. For purposes of determining the federal tax treatment of your particular Fullbright grant, information may be obtained from the United States Educational Foundation in India, which is located in New Delhi.
As a Virginia domiciliary resident, residing outside the United States, you are subject to tax on your entire income, regardless of the source. Virginia conforms to the federal treatment of scholarship or fellowship grants. Therefore, to the extent that the income received from the Fullbright grant is taxable for federal income tax purposes and included in federal adjusted gross income, it will be taxable for Virginia purposes.
I hope that the foregoing is helpful in answering your questions. If you need any further assistance, please contact the Department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner