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 Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether certain (23) prizes and awards (hereinafter referred to as "awards") administered by the Canada Council for the Arts (the "Council") qualify as prescribed prizes under section 7700 of the Regulations, for purposes of subparagraph 56(1)(n)(i) of the Act.
Position TAKEN:
It is a question of fact as to whether or not any particular award can qualify as a prescribed prize and, as such, can only be determined upon a review of all relevant documentation and information. While we cannot provide a definitive answer to this enquiry without a review of all relevant documentation and information, based on the comments in the incoming letter, we would agree that the first 16 awards would qualify as prescribed prizes and would not be taxable to the recipient. Of course, this assumes that the awards are not business or office or employment income to the recipient (and such a determination is also a question of fact, which would require a review of all relevant facts of each particular situation).
Of the remaining 7 awards, we have not been provided sufficient information to establish whether 3 can qualify as a prescribed prize and, based on the limited information provided, it appears questionable as to whether any of the last 4 can qualify as a prescribed prize.
Reasons FOR POSITION TAKEN:
First 16 awards:
The Council has made changes to the way it administers its grants and awards. In particular, none of these 16 awards no longer replace a grant and, where applicable, they are paid over and above a grant. In addition, we are advised that there are no restrictions on the use of these award moneys, such that these awards are not compensation for services rendered or to be rendered. These amounts are awarded for meritorious achievement in the arts, with certain amounts being awarded for meritorious achievement in the sciences. Finally, we are advised that all of the above awards are well publicised through mediums such as brochures, bulletins, press releases, the media and awards ceremonies.
The 3 awards for which we have insufficient information:
These awards are given to Council grant applicants and are based, in part, on the applicants proposed project. It is unclear how much weight is allocated to this factor and which other factors are considered. This information would be relevant in establishing whether the award is for services to be rendered, and whether the amount is essentially in respect of a "proposed" project, in which case it becomes questionable as to what is the "meritorious achievement" for purposes of section 7700 of the Regulations. In addition, it appears that there are some limitations on the use of the award money for one of these awards, such as the artist must allocate the sum to the development of his or her career. The exact details of the limitations would be required in order to assess their implications on the tax treatment of the award.
The 4 questionable awards:
We were advised that these awards are given to the "best" candidate amongst the Council grant applicants in the relevant areas. In our view, it is questionable that these awards are for "meritorious achievement", within section 7700 of the Regulations, as they essentially appear to be granted to best applicant in respect of a "proposed" project.
XXXXXXXXXX
Attention: XXXXXXXXXX
March 20, 2000
Dear Sirs:
Re: The Canada Council for the Arts (the "Council")
This is in reply to your letter of January 14, 2000, wherein you requested our views on whether certain prizes and awards administered by the Council qualify as prescribed prizes under section 7700 of the Income Tax Regulations (the Regulations), for purposes of subparagraph 56(1)(n)(i) of the Income Tax Act (the "Act"). The prizes and awards (hereinafter referred to as "awards") for which you have requested our views are as follows:
(1) Governor General's Literary Award
(13) Governor General's Award in Visual & Media Arts
(2) Canada-Japan Literary Award
(14) Izaak Walton Killam Memorial Prize
(3) Healey Willan Prize for Amateur Choirs
(15) Canada Council Grand Prize for CBC Young Composers Competition
(4) Canada Council for the Arts Molson Prize
(16) Canada Council/CBC First Prize for CBC Young Performers Competition
(5) Glenn Gould Prize
(17) Virginia Parker Prize
(6) Bell Canada Award in Video Art
(18) Jean Marie Beaudet Award
(7) John Hirsch Prize
(19) Sylva Gelber Foundation Award
(8) Petro-Canada Award for New Media
(20) Robert Fleming Prize
(9) Jules Léger Prize for New Chamber Music
(21) Duke and Duchess of York Prize in Photography
(10) Jacqueline Lemieux Prize
(22) Joseph S. Stauffer Prize
(11) Saidye Bronfman Award
(23) Victor Martyn Lynch-Saunton Award
(12) Ronald J. Thom Award for Early Design Achievement
You have requested our views on a number of the above awards on various occasions in the past, and we indicated that certain ones do not qualify as prescribed prizes, as they replaced a grant that was otherwise payable to the recipient. That is, individuals who had successfully qualified to receive a Council project grant, would receive the award instead, and still be required to carry out their project in accordance with the terms set out in their grant application.
You now indicate that the Council has made changes to the way it administers its grants and awards such that, in your view, all of the above awards now qualify as prescribed prizes. In particular, you note that none of the above amounts replace a grant and, where applicable, they are paid over and above a grant. In addition, you indicate that there are no restrictions on the use of the above award moneys, except for minor restrictions with respect to awards (17) and (19), such that the above awards are not compensation for services rendered or to be rendered. It is also your view that the above amounts are awarded for meritorious achievement in the arts, with certain amounts being awarded for meritorious achievement in the sciences. Finally, you indicate that all of the above awards are well publicised through mediums such as brochures, bulletins, press releases, the media and awards ceremonies.
Paragraph 56(1)(n) of the Act includes in income certain amounts received by a taxpayer as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer. However, paragraph 56(1)(n) of the Act does not apply to amounts received in the course of business, or to amounts received from an office or employment (i.e., to amounts required to be included in computing the taxpayer's income from a business, or from an office or employment). In addition, a "prescribed prize" is not included in income under paragraph 56(1)(n) of the Act. A "prescribed prize", as defined in section 7700 of the Regulations, is any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public but does not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered.
As indicated in our previous correspondence, it is a question of fact as to whether or not any particular award can qualify as a prescribed prize and, as such, can only be determined upon a review of all relevant documentation and information. Such documentation and information would, for instance, include the documentation pursuant to which the award was created and (where applicable) amended, internal documentation pursuant to which the Council administers the award, details of the application and selection criteria and process for the award, documentation signed by, or submitted to, the recipient upon the receipt of the award, and the details of the process through which an award is made public. While we cannot provide a definitive answer to your enquiry without a review of all relevant documentation and information, based on the comments in your letter, we would agree that the awards noted in (1) to (16) above, inclusive, would qualify as prescribed prizes and would not be taxable to the recipient. Of course, this assumes that the awards are not business or office or employment income to the recipient. Such a determination is also a question of fact, which would require a review of all relevant facts of each particular situation.
As regards the Virginia Parker Prize (award (17) above), it is unclear, based on the information provided, whether this award can qualify as a prescribed prize. For instance, you indicate that the merit of the musician's proposed project is one of the considerations for receiving the award; however, it is unclear how much weight is allocated to this factor and which other factors are considered. This information would be relevant in establishing whether the award is for services to be rendered, and whether the amount is essentially in respect of a "proposed" project, in which case it becomes questionable as to what is the "meritorious achievement" for purposes of section 7700 of the Regulations. You also indicate that there are some general limitations on the use of this award money, such as the artist must allocate the sum to the development of his or her career. The exact details of the limitations would be required in order to assess their implications on the tax treatment of the award.
In your letter, you indicate that awards (18) and (19) above apply only to Council grant applicants and are awarded based on the candidate's past work and his or her proposed project. Again, for the reasons explained above, in establishing whether these two awards meet the requirements of a prescribed prize, additional information would be required as to the significance attributed to the proposed project in awarding these amounts, and to any other relevant factor.
Finally, based on the limited information provided, it appears questionable as to whether any of awards (20) to (23) above, inclusive, can qualify as a prescribed prize. In this regard, you essentially indicate that these awards are given to the best candidate amongst the Council grant applicants in the relevant areas. In our view, it is questionable that these awards are for "meritorious achievement", within section 7700 of the Regulations, as they essentially appear to be granted to best applicant in respect of a "proposed" project.
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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