29 February 2008 External T.I. 2007-0224981E5 - Prescribed Prize

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.

Principal Issues: Whether the Hnatyshyn Foundation Visual Arts Award is a prescribed prize pursuant to section 7700 of the Income Tax Regulations.

Position: Yes.

Reasons: The award satisfies the criteria of Regulation 7700.

								2007-022498
XXXXXXXXXX 							Kathryn McCarthy, CA
(613) 948-6106
February 29, 2008

Dear XXXXXXXXXX ,

Re: Prescribed Prize - Hnatyshyn Foundation Visual Arts Award

This is in response to your letter of February 12, 2007, requesting our views regarding the taxability of the Hnatyshyn Foundation Visual Arts Award (the "Award"). We apologize for the delay in our response.

Paragraph 56(1)(n) of the Income Tax Act (the "Act") provides that all 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 are included in income to the extent that the total of these amounts received in the year exceeds the taxpayer's scholarship exemption. Further, the provision does not apply to amounts that are employment or business related. It is always a question of fact whether a particular prize is received in a field of endeavour ordinarily carried on by a taxpayer, in the course of employment or is business related.

Paragraph 56(1)(n) of the Act also does not apply to "prescribed prizes" which are defined in section 7700 of the Income Tax Regulations ("Regulations"). Such a prize is one that is recognized by the general public and that is awarded for meritorious achievement in the arts but does not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered.

In our opinion, in this particular case, subject to the exception for prizes received by virtue of employment or business, it is reasonable to conclude that the Award is a "prize" pursuant to paragraph 56(1)(n) of the Act because it is bestowed by a Canada-wide program whose stated purpose is to recognize a mid-career artist's outstanding body of work and in anticipation of the artist's future contribution to Canadian visual art. This supports the conclusion that visual art is the field of endeavour ordinarily carried on by the Award winner.

However, in our view, the Award is also a prescribed prize for the following reasons:

• The Award is recognized by the general public because:

a) the initial creation of the Award and the first Award winner were announced in a national press release, published on the Hnatyshyn Foundation's website and copies of the announcements were sent to all public art galleries in Canada;

b) nominations for the Award are made by professionals in the Canadian arts community, which suggests widespread knowledge of the Award; and

c) an expert jury of 6 regional curators shortlists the candidates (based on nominations made by the jury) and chooses the Award winner;

• The Award is received by the winner for meritorious achievement in the arts; and
• The Award can reasonably be regarded as not having been received as compensation for services rendered or to be rendered.

In view of the foregoing, we are of the opinion that the award is a prescribed prize under section 7700 of the Regulations.

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch