5 November 2001 External T.I. 2001-0107275 - XXXXXXXXXX

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Income inclusion of taxable prizes pursuant to paragraph 56(1)(n) received by athletes.

Position TAKEN:

Clarification of reduction under subsection 56(3).

Reasons:

Error in original letter.

XXXXXXXXXX 2001-010727
T. Young, CA
November 5, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are writing to you in follow-up to our letter to you on September 25, 2001 (our reference 2001-008297), concerning the taxation of funds provided through XXXXXXXXXX incentive programs, XXXXXXXXXX.

In our original letter, we stated that, if prizes are taxable pursuant to paragraph 56(1)(n) of the Income Tax Act (the "Act"), the amount that must be included in income may be reduced by an amount calculated in subsection 56(3) of the Act. We stated that the amount is the greater of $500 and the total of any expenses incurred by the athlete for the purpose of fulfilling the conditions under which the amount was received. Further, we also noted that such expenses cannot include:

1. personal or living expenses other than expenses in respect of travel, meals and lodging incurred in the course of earning the income where the athlete was required to be absent from the athlete's usual place of residence,

2. reimbursed expenses, and

3. expenses, which are deductible in computing the athlete's income under another provision of the Act.

We would like to point out that, under the Act, the above calculation only applies to prizes "to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work". Since your situation dealt with prizes received by athletes in connection with their athletic endeavours, the reduction pursuant to subsection 56(3) is simply $500.

This letter is issued as a clarification only. We hope that it will be helpful.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate