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Section 123 of the Tax Reform Act of 1986 (the Act), Pub. L.
101-514, 100 Stat. 2085, 2112, amended section 117, relating to
the exclusion of the scholarship and fellowship grants from gross
income. Before amendment by the Act, section 117(b)(1) excluded
from gross income amounts received representing payments for
teaching or research that were in the nature of part-time
employment, if such teaching or research was required of all
candidates (whether or not recipients of scholarships or
fellowship grants) as a condition of receiving a degree. Thus,
the Act repealed the provisions under section 117 that excluded
from gross income amounts received by degree candidates under a
scholarship or fellowship grant where such amounts actually
represented payment for services. See Staff of Joint Comm. on
Taxation, General Explanation of the Tax Reform Act of 1986 (J.
Comm. Print 1987). Also, as a result of the Act, amounts from
grants that were used for other expenses, such as room and board,
were not includable in the gross income of the recipient. Sec.
117(b) and (c).
The amendments to section 117, while made generally
applicable to taxable years beginning on or after January 1,
1987, were only made applicable to scholarships or fellowships
"granted" after August 16, 1986. H. Conf. Rept. 99-841, at II-17
(1986), 1986-3 C.B. (Vol. 4) 1, 17.
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