Par. 4. Section 1.25A-2 is amended by: 1. Revising paragraphs (d)(2)(i) and (ii). 2. In paragraph (d)(2)(iii), removing the language “(d)(3)” and adding “(d)(4)” in its place. 3. Redesignating paragraphs (d)(3), (4), (5), and (6) as paragraphs (d)(4), (5), (6), and (7), respectively. 4. Adding a new paragraph (d)(3). 5. In newly redesignated paragraph (d)(5), by removing the language “(d)(3)” and adding “(d)(4)” in its place. 6. In newly redesignated paragraph (d)(7), revising Example 2, redesignating Examples 3, 4, 5, and 6, as Examples 4, 5, 6, and 7, and adding a new Example 3. 7. Adding paragraph (e). The revisions and additions read as follows:
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(d) * * *
(2) Required fees —(i) In general. Except as provided in paragraphs (d)(3) and (4) of this section, the test for determining whether any fee is a qualified tuition and related expense is whether the fee is required to be paid to the eligible educational institution as a condition of the student's enrollment or attendance at the institution.
(ii) Books, supplies, and equipment. For taxable years beginning before January 1, 2009, for purposes of the Hope Scholarship Credit, and for taxable years beginning after December 31, 1997, for purposes of the Lifetime Learning Credit, qualified tuition and related expenses include fees for books, supplies, and equipment used in a course of study only if the fees must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution. For taxable years beginning after December 31, 2008, see paragraph (d)(3) of this section for rules relating to books, supplies and equipment for purposes of the American Opportunity Tax Credit.
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(3) Course materials for the American Opportunity Tax Credit for taxable years beginning after December 31, 2008. For taxable years beginning after December 31, 2008, the term “qualified tuition and related expenses” for purposes of the American Opportunity Tax Credit under section 25A(i) includes the amount paid for course materials (such as books, supplies, and equipment) required for enrollment or attendance at an eligible educational institution. For this purpose, “required for enrollment or attendance” means that the course materials are needed for meaningful attendance or enrollment in a course of study, regardless of whether the course materials are purchased from the institution.
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(7) * * *
Example 2.
First-year students attending College W during 2008 are required to obtain books and other materials used in its mandatory first-year curriculum. The books and other reading materials are not required to be purchased from College W and may be borrowed from other students or purchased from off-campus bookstores, as well as from College W's bookstore. College W bills students for any books and materials purchased from College W's bookstore. The expenses paid for the first-year books and materials purchased at College W's bookstore are not qualified tuition and related expenses because under § 1.25A-2(d)(2)(ii) the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. In addition, expenses paid for the first-year books and materials borrowed from other students or purchased from vendors other than College W's bookstore are also not qualified tuition and related expenses because under § 1.25A-2(d)(2)(ii) the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
Example 3.
Assume the same facts as Example 2, except that the books and materials are required for first-year students attending College W during 2009. Because the expenses are paid with respect to enrollment or attendance after 2008, § 1.25A-1(d)(3) applies rather than § 1.25A-1(d)(2)(ii), if the taxpayer claims the American Opportunity Tax Credit under section 25A(i). Under § 1.25A-1(d)(3), expenses for books and other course materials are qualified tuition and related expenses for purposes of the American Opportunity Tax Credit if they are needed for meaningful attendance in the student's course of study at College W. Accordingly, if the taxpayer claims the American Opportunity Tax Credit for 2009, the expenses paid for the first-year books and materials are qualified tuition and related expenses. However, if the taxpayer claims the Lifetime Learning Credit for 2009 under section 25A(c), § 1.25A-2(d)(2)(ii) applies rather than § 1.25A-1(d)(3). Accordingly, if the taxpayer claims the Lifetime Learning Credit, the expenses paid for the first-year books and materials purchased at College W's bookstore are not qualified tuition and related expenses because under § 1.25A-2(d)(2)(ii) the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
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(e) Applicability date. (1) Except as provided in paragraph (e)(2) of this section, this section applies on or after December 26, 2002.
(2) Paragraphs (d)(2)(i), (d)(2)(ii), (d)(3), and Examples 2 and 3 of paragraph (d)(7) of this section apply to qualified tuition and related expenses paid, and education furnished in academic periods beginning, on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register . However, taxpayers may apply paragraphs (d)(2)(i), (d)(2)(ii), (d)(3), and Examples 2 and 3 of paragraph (d)(7) of this section for taxable years beginning after December 31, 2008, for which the period of limitations on filing a claim for credit or refund under section 6511 has not expired.