Potter Stewart

“ When an employee has completed all preliminary requirements for his doctorate, he may apply for an educational leave of absence, which constitutes the second phase of the Fellowship Program. He must submit a proposed dissertation topic for approval by Westinghouse and the AEC. Approval is based, inter alia, on a determination that the topic has at least some general relevance to the work done at Bettis. If the leave of absence is secured, the employee devotes his full attention for a period of at least several months, [5] to fulfilling his dissertation requirement. ”

“ The cases decided under this approach prior to 1954 generally involved two types of financial assistance: grants to research or teaching assistants-graduate students who perform research or teaching services in return for their stipends-and foundation grants to post-doctoral researchers. In cases decided shortly before the 1954 Code was enacted, the Tax Court, relying on the 'gift' approach to scholarships and fellowships, held that amounts received by a research assistant were taxable income, [20] but reached divergent results in situations involving grants to post-doctoral researchers. ”

“ The sounder inference is that Congress was merely 'recogni (zing) that scholarships and fellowships are sufficiently unique * * * to merit (tax) treatment separate from that accorded gifts,' [22] and attempting to provide that grants falling within those categories should be treated consistently-as in some instances, under the generic provisions of the 1939 Code, they arguably had not been. ”

“ See generally Tabac, Scholarships and Fellowship Grants: An Administrative Merry-Go-Round, 46 Taxes 485 (1968) .↑ The contract's provision that employees who avail themselves of educational leave will be assigned duties 'commensurate with (their) education and experience,' and compensated at rates 'commensurate with' those duties, is hardly sufficient to avoid the clear inference that their grants are fully bargained for and in the nature of compensation. The program is featured in Westinghouse's recruiting efforts as a benefit attractive to many potential employees. ”

“ In Ussery, the Court of Appeals for the Fifth Circuit specifically upheld Treas.Reg. § 1.117-4 (c) and held taxable monthly payments received by an employee of the Mississippi Department of Public Welfare who had been given leave to secure a master's degree in social work. The taxpayer there received employee benefits while on leave, and was obligated to return to the department following completion of his studies. ”

“ The difficulty with that position, however, lies in its implicit assumption that those limitations are limitations on an exclusion of all funds received by students to support them during the course of their education. ”

“ Had the company modified its program so that the amounts of the 'fellowship' grants were spread over the years preceding and following the educa ional leave-as increments to the respondents' salary, set aside in a company-administered 'educational fund'-there could be little doubt that those amounts would have represented compensation. We see no persuasive reason why a different tax result should be reached under Treas.Reg. ”

“ Commissioner, 22 T.C. 220 (university grant for National Health Service research held taxable) , with Stone v. Commissioner, 23 T.C. 254 (foundation grant held nontaxable) .↑ Gordon, Scholarship and Fellowship Grants as Income: A Search for Treasury Policy, 1960 Wash.U.L.Q. 144, 151.↑ That version provided for the exclusion only of grants that, together with compensation received from the recipient's former employer, were less than 75% of his salary for the preceding year. ”