Rev. Rul. 65-59

Revenue Ruling 59-118, C.B. 1959-1, 41, holds that amounts paid by the Veterans' Administration to graduate students while serving a training period at Veterans' Administration hospitals as staff assistants, as a condition to receiving a doctorate degree in psychology from a university, represent compensation for services rendered and not nontaxable scholarships or fellowship grants and, accordingly, such amounts are includible in the student-employees' gross income under section 61 of the Internal Revenue Code of 1954.

It was decided not to appeal the decisions in William and Doris Wells v. Commissioner, 40 T.C. 40 (1963), and Richard A. Anderson v. United States, 61-1 USTC Paragraph 9162 (1961), which are in conflict with Revenue Ruling 59-118. Accordingly, pending amendment of the Income Tax Regulations under section 117 of the Code, the Service will not litigate cases wherein amounts have been received under circumstances substantially identical to those in the Wells and Anderson cases and Revenue Ruling 59-118 will not be applied in disposing of cases involving stipends paid by the Veterans' Administration to graduate students while serving a training period as staff assistants at Veterans' Administration hospitals.

Revenue Ruling 59-118 is hereby suspended until the applicable regulations are amended.

¹ Based on Technical Information Release 681, dated Jan. 22, 1965.