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: The income tax treatment of the Walter Carsen Prize for Excellency in the Performing Arts, the Virginia Parker Prize, and the Sylva Gelber Foundation Award.
Position: Questions of fact.
Reasons: The primary issue to be decided with respect to any prize awarded by the Canada Council for the Arts is whether it qualifies as a "prescribed prize," in which case it will be excluded from income under paragraph 56(1)(n) of the Income Tax Act. Section 7700 of the Income Tax Regulations describes a "prescribed prize," as 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.
XXXXXXXXXX J. Gibbons, CGA
2001-007745
May 4, 2001
Dear XXXXXXXXXX:
We are replying to your letter dated March 27, 2001, in which you requested our comments on three particular prizes awarded by the Canada Council for the Arts (the "Council"). One of the prizes is a new prize, the Walter Carsen Prize for Excellency in the Performing Arts (the "Carsen Prize"), while the other two prizes, the Virginia Parker Prize (the "Parker Prize") and the Sylva Gelber Foundation Award (the "Gelber Prize"), were described in an earlier letter from you, to which we responded on March 20, 2000. You have now provided additional information on the Parker Prize and the Gelber Prize.
As you know, the primary issue to be decided with respect to any prize awarded by the Council is whether it qualifies as a "prescribed prize," in which case it will be excluded from income under paragraph 56(1)(n) of the Income Tax Act. Section 7700 of the Income Tax Regulations describes a "prescribed prize," as 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. However, although we cannot provide a definitive answer with respect to any of the Council's prizes, we offer the following general comments based on the additional information submitted. Further, our comments are based on the presumption that the prize would not be business or office or employment income of the recipient, which is another aspect that would have to be determined from an actual review of all of the surrounding facts.
The Carsen Prize
In your letter, you stated the following:
"The Carsen Prize is an annual prize that will recognize the highest level of artistic excellence and distinguished career achievement by a Canadian professional artist in dance, theatre or music. The prize will be awarded on a four-year cycle, in dance, theatre, dance and music, and is in the annual amount of $50,000".
"There are no restrictions on the use of the funds. Candidates may not apply for the prize; they must be nominated by a member of the Canadian professional performing arts community. The prize is awarded at a public ceremony. The Carsen Prize does not replace a grant."
"Candidates must be professional artists who are Canadian citizens or permanent residents of Canada. They must have created, as creative and/or interpretative artists, an outstanding and distinguished body of work in: classical or contemporary dance; opera, music theatre, classical music, classical contemporary Canadian music, new music or jazz; or repertory or contemporary Canadian theatre."
"It is anticipated that the recipient's work will have been recognized and respected for its artistic excellence by the nominee's peers at the national and international levels. The nominee must be actively involved in the performing arts in Canada or have spent the majority of his or her artistic career in Canada. The nominee's career will likely have covered a significant period of time."
"While this award is designed for the recognition of individual achievement rather than for recognition of the work of an organization, it may also recognize artistic partnerships or small ensembles in which each artist meets the eligibility requirements for the prize."
"The assessment of nominations will be carried out by a committee composed of experienced professionals selected by the Canada Council for the Arts for their expertise in dance, theatre or music. The committee may include one expert from outside Canada. Members are also chosen to ensure a fair representation of gender, the two official languages, the various regions and cultures of Canada, and the various types of artistic practices within the performing arts community. The principal assessment criteria for the prize would be the artistic excellence of the artist's work and the significance of the artist's achievements over the course of his or her career."
"A condition of granting the award is that the laureate must agree to participate fully in all prize activities, including media conferences, ceremonies, receptions and other related events."
Our View
In our view, the Carsen Prize would likely qualify as a prescribed prize under section 7700 of the Regulations, since it appears that it is a prize "that is recognized by the general public and that is awarded for meritorious achievement in the arts ..." However, this is based on the presumption that the prize would not be business or office or employment income of the recipient.
The Parker Prize
In your first letter, you provided the following information:
"One Virginia Parker Prize, in the amount of $25,000, is awarded annually in the field of music to a young performer in classical music. The recipient must be a Canadian citizen or permanent resident who is recognized as a professional musician. The recipient must also have received at least one Council grant. However, the prize does not replace a grant."
"Nominations are made by a peer committee or Council staff recommendation and the laureate is chosen by a five-member peer assessment panel. The merit of the musician's proposed project is one of the considerations of the panel. However, the prize is in addition to a grant and does not replace it. The prize is not in respect of a specific project. The artist must allocate the sum to the development of some aspect of his or her career. Therefore, there are some general limitations on the use of the funds; however, these limitations do not relate to using the funds for a specific project or a specific course of study and should not be considered remuneration, a scholarship or other income."
We responded in our March 20, 2000, letter as follows:
"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 latest letter, you provided the following additional information:
"The requirement that the recipient have received a Canada Council grant at some point in their career is not one stipulated by the donor. It instead provides the practical means by which a group of potential candidates may be identified. It would be time consuming and expensive to attempt to establish a pool of candidates in some other way. Officials of the Canada Council indicate that the vast majority of individuals who would qualify for the Parker Prize would be former Canada Council grant recipients. It is interesting to note that for each winner of a prize such as the Parker Prize, there would be many grant recipients, but that those who are nominated for the Prize are normally well into their professional career and no longer apply to the Canada Council for regular grants of up to $20,000. They may apply for the much smaller touring grants for specific travel needs."
"Once officials within the Canada Council gather a list of suitable candidates, each candidate is invited to submit documentation on their career to date and on their expected future career path to a jury convened to award the Parker Prize. The word "project" as used in earlier correspondence was unfortunate. The candidates are not asked to submit a project relating to the use of the funds. Rather, the candidates are asked to provide certain information for the consideration of the committee; a current curriculum vitae, a one-page biography, a personal artistic statement regarding his/her career and a current audio or video tape presenting a recent performance or performances."
"In our submission, the mere fact that the jury considers an applicant's statement regarding his or her career should in no way prevent one from concluding that the prize cannot reasonably be regarded as having been received as compensation for services rendered or to be rendered and that it is awarded for meritorious achievement."
"The prize is presented at a public awards ceremony usually linked to a performance by the artist."
Our View
As indicated in our first letter, the exact details of the limitations on the use of the award money received by the winners of the Parker Prize would be required before we can offer more definitive comments on the income tax treatment of this award. Without this information, we cannot ascertain whether the award is strictly for meritorious achievement. For instance, if the use of the award money is subject to specific limitations and must be used on a particular project, it may be regarded as a receipt for services to be rendered rather than for meritorious achievement.
The Gelber Prize
In your first letter, you provided the following information:
"This $15,000 award in music is given to a promising young classical musician, under the age of 30, who is a Canadian citizen or permanent resident. The winner must have received a Council grant in the Individual Musicians category. A peer assessment committee selects the recipient based on artist's body of work, and the significance of the proposed project on the artist's development. The award is presented at an awards ceremony, and does not replace a grant. The only restriction on the use of the award is that it may not be used by the artist to purchase an instrument."
We responded in our March 20, 2000, letter as follows:
"In your letter, you indicate that awards (18) and (19) [the Gelber Prize] 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".
In your latest letter, you provided the following additional information:
"We would reiterate all of the points made in respect of the Parker Prize. There is simply no factual basis upon which it can be said that services were or are to be rendered, nor is there a basis for suggesting that the prize is not awarded for meritorious achievement. The fact that the prize may not be used to purchase an instrument is, in our view, irrelevant to whether it qualifies as a prescribed prize."
Our View
Based on the additional information provided, it is our view that the Gelber Prize would likely qualify as a "prescribed prize" under section 7700 of the Regulations since it appears that it is a prize "that is recognized by the general public and that is awarded for meritorious achievement in the arts ..."
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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