28 January 2002 External T.I. 2001-0105395 - canada council grants-income

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:

Comments with respect to receipt of a Canada Council Grant to make a short animated film.

Position:

Appears to be self-employment income
Refer to Business and Professional Guide

Reasons:

Business activities

XXXXXXXXXX 2001-010539
C. Tremblay, CMA
January 28, 2002

Dear XXXXXXXXXX:

This is in reply to your letter of September 28, 2001, wherein you seek our help in reporting your income with respect to a Canada Council Production Grant and two smaller grants you received from some local arts organizations to make a short animated film.

We enclose a copy of Interpretation Bulletin IT-504R2 (Consolidated), Visual Artists and Writers as you requested and a copy of Interpretation Bulletin IT-75R3 Scholarships, Fellowships, Bursaries, Prizes, and Research Grants, which may also be of interest to you.

Also as requested, paragraph 56(1)(n) of the Income Tax Act (the Act") states in part as follows:

"56(1)(n) Scholarships, bursaries, etc

the amount, if any, by which

(i) the total of all amounts (other than amounts described in paragraph (q), amounts received in the course of business, and amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the 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, other than a prescribed prize,
exceeds

(ii) the taxpayer's scholarship exemption for the year computed under subsection (3)..."

However, in our view, paragraph 56(1)(n) of the Act may not be relevant to your situation.

In order to determine the tax consequences in respect of specific grants, it is necessary to review all the relevant facts and documentation. You did not provide us with enough information on the arrangement or circumstances under which the grants are provided, however, the subject grants should be treated as business income if the grants relate to your self-employment activities. Generally, you would also be allowed to deduct the expenses incurred for the purpose of producing the income from the business activity. In this regard, the Guide entitled Business and Professional Income available at our web site at http://www.ccra-adrc.gc.ca or at the XXXXXXXXXX taxation services office will provide you the necessary information to assist you in the preparation of your income tax return.

The foregoing comments represent our general view with respect to the subject matter. As indicated in paragraph 22 of Information circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency.

We trust the above comments are of assistance.

Yours truly,

for Director,
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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