A Practical Guide to Assist Hospitals and Physicians Obtain Fellowship Tax Exclusion

26 U.S.C. §117, Scholarships and fellowship grants.

394 U.S. 741 (1969).

Treas. Reg. §1.117 (c)(1) (1956).

See Bingler v. Johnson, 394 U.S. 741, 756–57 (1969); Bonn v. Commissioner, 34 T.C. 64, 70–73 (1960) (where resident at VA Hospital performed valuable and essential professional services, stipend from private foundation was taxable, since training was secondary to patient care); Bachmura v. Commissioner, 32 T.C. 1117, 1126 (1959) (payments to non-degree candidate stem from employment relationship and are taxable).

See Wells v. Commissioner, 40 T.C. 40, 48–49 (1963) (where purpose of VA training program was to both provide service and train recipient, court rejects contention that employment relationship alone makes payments taxable).

See Steiman v. Commissioner, 56 T.C. 1350, 1355–56 (1971) (where financial need of academically qualified students, rather than their teaching abilities, was primary consideration in awarding graduate assistantships, such awards were non-taxable).

See Stougaard v. Commissioner, 30 T.C.M. 1331, 1336 (1971) (where state could command services of recipient, financial need of recipients was not determinative); see generally, Bingler v. Johnson, 394 U.S. 741 (1969).

See Chestmore v. Commissioner, 33 T.C.M. 1226, 1230–31 (1974) (Ph.D. candidate entitled to exclusion under Section 117 since no substantial services were rendered to teaching hospital and the one-year internship was requirement for degree); Wells v. Commissioner, 40 T.C. 40 (1963).

Hembree v. United States, 464 F.2d 1262, 1264 (4th Cir. 1972) (even though state law provided that primary purpose of university hospital was training of physicians rather than treatment of patients, it is the purpose of the payment, not of the facility, that is determinative of whether the income exclusion is afforded taxpayer).

See Bingler v. Johnson, 394 U.S. 741, 757 (1969) (periodic word reports, as well as other factors, signify that payments were made in compensation for services).

See generally, Stieman v. Commissioner, 56 T.C. 1350 (1971); Jamieson v. Commissioner, 51 T.C. 635 (1969) (payments to teaching assistant not based upon financial need, but for services rendered in capacity subject to the same regulations as regular employees).

See Spruch v. Commissioner, 20 T.C.M. 324, 326 (1961).