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The amendments to section 117 are effective for taxable
years beginning on or after January 1, 1987, except that the
prior law continues to apply to scholarships and fellowships
granted before August 17, 1986. H. Conf. Rept. 99-841 (Vol. 2),
at II-17 (1986), 1986-3 C.B. (Vol. 4) 1, 17. Section 1.117-
6(f)(3), Proposed Income Tax Regs., 53 Fed. Reg. 21688 (June 9,
1988), states a transitional rule for determining whether a
scholarship or fellowship is to be considered granted before
August 17, 1986, as follows:
(3) Scholarships or fellowships granted before
August 17, 1986--(i) In general. For purposes of this
section, a scholarship or fellowship is considered
granted before August 17, 1986, to the extent that, in
a notice of award made before that date, the grantor
made a firm commitment to provide the recipient with a
fixed cash amount or a readily determinable amount. A
notice of award is treated as containing a firm
commitment even if the scholarship or fellowship grant
is subject to a condition that the recipient remain in
good standing or maintain a specific grade point
average. In addition, a requirement that the recipient
file a financial statement on an annual basis to show
continuing financial need is not treated as a
requirement to reapply to the grantor. If a
scholarship or fellowship, initially awarded before
August 17, 1986, is granted for a period exceeding one
academic period (for example, a semester), amounts
received in subsequent academic periods are treated as
granted before August 17, 1986, only if--
(A) The amount awarded for the first academic
period is described in the original notice of award
as a fixed cash amount or readily determinable
amount;
(B) The original notice of award contains a firm
commitment by the grantor to provide the
scholarship or fellowship grant for more than one
academic period; and
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