I recall my days in university with some fondness. There were some odd moments. I remember the time my roommate, Paul, was getting dressed to go to a dorm party and realized he had no clean shirts. Paul was always good at thinking on his feet, so he wrapped himself in a sheet and showed up claiming that he thought it was a toga party. People bought that story.
Today, postsecondary education can be very different. You can get a degree without actually attending a class in person or meeting your classmates face to face. Distance education can make good sense despite the fact that it doesn't come with the same first-year dorm experience, but it has led to some confusion about tuition tax credits. If your New Year's resolutions include working toward a postsecondary degree from a distance, you'll want to read on.
THE STORY
In the case of Abdalla v. The Queen, Mr. Abdalla was enrolled at the University of Phoenix, taking a number of online courses leading to a degree. As soon as a course was completed, Mr. Abdalla would start another one. No single course was 13 weeks or more in duration, although by taking the courses back to back Mr. Abdalla's courses in aggregate were certainly more than 13 weeks long.
Mr. Abdalla transferred some tuition credits to his wife, May Abdalla. When Canada Revenue Agency looked at the tuition paid by Mr. Abdalla, it disallowed $3,154 of the tuition claim, and therefore disallowed the transfer of this tax credit to his wife. Although Mrs. Abdalla was the taxpayer fighting the CRA in court on this issue, it was really the tuition of her husband that was in question. CRA denied the claim on the basis that Mr. Abdalla was not enrolled in a course of 13 weeks or more in duration.
THE LAW
Our tax law will allow a tuition tax credit in three possible situations: (1) where an individual is enrolled at an educational institution in Canada (part-time or full-time); (2) where an individual is in full-time attendance in courses leading to a degree at a university outside Canada; and (3) where an individual resided near the border between Canada and the U.S., was enrolled at an educational institution in the United States that provided courses at the postsecondary level, and commuted to that institution.
If either (1) or (3) applies to you, there is no requirement that the courses be of a certain duration. If scenario (2) applies, then our tax law will exclude any tuition "paid in respect of a course of less than 13 consecutive weeks duration." The question, in this case, is whether Mr. Abdalla was enrolled in a course of 13 weeks duration or longer.
A review of past court decisions is not really helpful since there are conflicting decisions. In Ferre v. The Queen, the judge concluded that reference to "a course" in our tax law means an individual course. In the case Siddell v. The Queen, the judge concluded that the word "course" refers not to the individual modules, but the entire curriculum pursued throughout the academic year.
THE MORAL
Justice Webb in Mrs. Abdalla's case agreed with the judge in the Siddell case. He made reference to subsection 33(2) of the Interpretation Act, which says that "words in the singular include the plural, and words in the plural include the singular." Therefore, he concluded, that where the Income Tax Act refers to the word "course," it will include "courses." This was good news for the Abdallas. The fact that Mr. Abdalla was enrolled in consecutive courses that in total amounted to more than 13 weeks of study was enough for Mrs. Abdalla to win her battle with Canada Revenue.
The tax court rendered another decision on the same issue on the same day. In Lowry v. The Queen, the taxpayer was not able to claim his tuition because he took a week break between each of the online courses (each of which was less than 13 weeks in duration). This did not meet the test of 13 weeks of "consecutive" study required under our tax law.
The moral of the story? Taking online courses from a non-Canadian institution can give rise to tax credits, but make sure you meet the 13-week test for consecutive study. Carefully plan the timing of your study to gain maximum tax relief.
Tim Cestnick