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requirement. The board certification process was separate from
the hematology training program.
On their joint 1993 Federal income tax return, petitioners
did not include in income the $14,750 fellowship grant received
from NIH. Respondent determined that the grant was includable in
income.
Discussion
Section 61(a) defines gross income to mean all income from
whatever source derived. The internal revenue statutes and/or
case law, however, have recognized in one form or another an
exemption for financial aid to persons pursuing education goals.
See Spiegelman v. Commissioner, 102 T.C. 394 (1994). Prior to
1986, the exemption from income of scholarship or fellowship
payments focused basically on whether the recipient was required
to perform services or to provide a benefit for another in a quid
pro quo arrangement. Id. at 399-402. The pre-1986 section 117
was amended by section 123 of the Tax Reform Act of 1986, Pub. L.
99-514, 100 Stat. 2085, 2112. The 1986 change was designed to
shift the focus of the tax exemption to the use of the funds.
The legislative history highlights the congressional intent:
The committee believes that the exclusion for scholarships
should be targeted specifically for the purpose of
educational benefits, and should not encompass other items
which would otherwise constitute nondeductible personal
expenses. [H. Rept. 99-426, at 100 (1985), 1986-3 C.B.
(Vol. 2) 1, 100.]
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