11 December 2002 External T.I. 2002-0172305 - RESEARCH AWARD

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:

Whether prizes awarded to members of XXXXXXXXXX qualify as a prescribed prize within the meaning of Regulation 7700.

Position:

-question of fact; likely no.

Reasons:

While prizes meet criteria in that they are based on merit and are not compensation for services rendered, they do not appear to meet the "recognized by the general public criteria"

XXXXXXXXXX Lena Holloway
2002-017230
December 11, 2002

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are writing in reply to your letter of November 1, 2002, wherein you enquired whether the above awards would be considered prescribed prizes for purposes of subparagraph 56(1)(n)(i) of the Income Tax Act (the "Act") and section 7700 of the Income Tax Regulations (the "Regulations"). The two awards in question are described below.

XXXXXXXXXX

Our Comments

Written confirmation of the tax consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Notwithstanding the foregoing, we are prepared to provide the following comments.

Regulation 7700 defines prescribed prizes for purposes of subparagraph 56(1)(n)(i) of the Act. A prescribed prize is any prize which 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.

From the written descriptions of the prizes as submitted, we agree that both XXXXXXXXXX are based on meritorious achievement. However, Regulation 7700 also requires that the prizes must be "recognized by the general public." It is a question of fact whether a prize is considered recognized by the general public. In making such a determination, we would consider whether the prize was widely acknowledged, if the media publicizes the announcement for application or receipt of the prize and whether the prize was available to a broad base of applicants. Based on the information provided, we are not satisfied that this requirement has been met for either of the prizes. Accordingly, we are of the view that XXXXXXXXXX would be taxable under paragraph 56(1)(n) of the Act to the extent that they exceed the recipient's scholarship exemption (as determined under subsection 56(3) of the Act).

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.

We trust the above comments are of assistance.

Yours truly,

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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