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 two proposed new prizes to be given by XXXXXXXXXX will qualify as prescribed prizes for the purposes of paragraph 56(1)(n) of the ITA under section 7700 of the Regulations.
Position: It is a question of fact whether a particular award can qualify as a prescribed prize and, as such, can only be determined upon a review of all relevant documentation and information.
Reasons: We have not been provided with sufficient information to establish whether the proposed awards can meet the requirements of a prescribed prize.
XXXXXXXXXX
2010-038771
Ananthy Mahendran
September 16, 2011
Dear XXXXXXXXXX :
Re: Request for Technical Interpretation: XXXXXXXXXX
We are writing in response to your letter wherein you asked our opinion as to whether two proposed new prizes, which would be given by XXXXXXXXXX , will qualify as prescribed prizes for the purposes of paragraph 56(1)(n) of the Income Tax Act (the "Act") under section 7700 of the Income Tax Regulations (the "Regulations"). We apologize for the delay in replying.
Paragraph 56(1)(n) of the Act will require the inclusion in a taxpayer's income of a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer in the year, other than a "prescribed prize", unless the particular prize is received in the course of business, or in respect of, in the course of or by virtue of an office or employment by the taxpayer.
A prescribed prize is defined in section 7700 of the Regulations and is generally described 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. A prescribed prize will, however, not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered.
Determining whether a prize is recognized by the general public requires an element of evaluation or appreciation. In making such a determination, CRA considers evidence that suggests a high level of public awareness of the prize which could include the extent to which any public announcement or receipt of the prize is widely publicized by the media and whether the prize was available to a broad base of applicants. In terms of the creation of the award and its public recognition, your submission states that "XXXXXXXXXX ." It also states that "XXXXXXXXXX ."
It is a question of fact whether a particular award can qualify as a prescribed prize and, as such, can only be determined upon a review of all relevant documentation and information. Such documentation and information would, for instance, include the documentation pursuant to which the award was created and (where applicable) amended, internal documentation pursuant to which XXXXXXXXXX administers the award, details of the application and selection criteria and process for the award, documentation signed by, or submitted to, the recipient upon the receipt of the award, and the details of the process through which an award is made public.
It is your view that the proposed prizes will qualify as prescribed prizes within the meaning of section 7700 of the Regulations in anticipation of the fact that public recognition will follow. However, we are of the view that we have not been provided sufficient information to establish whether the proposed awards can meet the requirements of a prescribed prize and therefore, without a detailed review of all relevant documentation and information, we cannot provide an answer to your enquiry.
We trust that our comments will be of assistance.
Yours truly,
Sharmini Ratnasingham
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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