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.
Mr. W.J. Stevenson, C.A. Head, Finance Section The Canada Council 99 Metcalfe Street P.O. Box 1047 Ottawa, Ontario K1P 5V8
Dear Mr. Stevenson:
RE: J.B.C. Watkins Awards - Prescribed Prize
We are writing in reply to your letter of September 10, 1992, wherein you requested confirmation that the J.B.C. Watkins Award (the "Watkins Award") would be considered to be a prescribed prize for purposes of subparagraph 56(1)(n)(i) of the Income Tax Act (the Act) as defined in section 7700 of the Income Tax Regulations (the Regulations).
FACTS
Our understanding of the facts in this case, as set out in the above noted letter and clarified in your letters of February 3 and 16, 1993, (which were in response to our requests for information dated November 12, 1992, and February 8, 1993) is as follows:
Artists may make application to the Canada Council for funding of their projects. Of the successful "B" Grant applicants, a certain number are nominated for the Watkins Award. This award is made by a jury of the artists' peers. The Watkins Award, which is paid from a bequest from the estate of the late J.B.C. Watkins, replaces the Canada Council grant that would otherwise be payable to the successful "B" Grant applicants.
The recipients of the Watkins Award are required to carry out their projects in accordance with the terms set out in their "B" Grant Applications.
Our Comments
The word "prize", in the context of the Act, has been considered by the Supreme Court of Canada in The Queen v. Savage, 83 DTC 5409. The Court's findings in this regard are reflected in paragraph 16 of IT- 75R2 as enunciated in a Special Release (copy attached). After reviewing the information provided, and, in particular, the application form entitled "Application for Arts Grant "B"", we are of the opinion that recipients of the Watkins Award would not be in receipt of a prize for something accomplished but rather, in receipt of financial assistance for some project to be carried out by the recipient in the future.
From the information provided, it is our opinion that the grants received by the various recipients would be considered to be either business income for purposes of subsection 9(1) of the Act, or "a scholarship, fellowship or bursary" for purposes of subparagraph 56(1)(n)(i) of the Act, depending on the facts in a particular situation. In this regard, we are enclosing copies of our Interpretation Bulletin IT-257, dated October 20 1975, entitled "Canada Council Grants" and the Special Release thereto dated March 21, 1986. This bulletin discusses the general principles used in determining the income tax status of Canada Council Grants for the recipients of the grants.
In view of the forgoing, it is our opinion that the Watkins Award would not be considered to be a prescribed prize as defined in section 7700 of the Regulations.
Should the Watkins Award relate to tuition costs, the recipients may be eligible for the tuition tax credit and/or the education tax credit, as the case may be, if the recipients fulfil the requirements of sections 118.5 and 118.6 of the Act. Copies of our Interpretation Bulletins IT-515 (Education Tax Credit) and IT-516 (Tuition Tax Credit) are also enclosed for your information.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco for Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Assessment of Returns Directorate Client Assistance Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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