25 September 2001 External T.I. 2001-0082975 - FUNDING FOR ATHLETES

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Taxation of payments to athletes pursuant to XXXXXXXXXX incentive programs.

Position TAKEN:

Taxable.

Reasons:

Awards are taxable under paragraph 56(1)(n) unless taxable as business or employment income.

XXXXXXXXXX 2001-008297
T. Young, CA
September 25, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are writing to reply to your letter of May 1, 2001, concerning the taxation of funds provided through XXXXXXXXXX incentive programs, XXXXXXXXXX

XXXXXXXXXX

Our Comments

Written confirmation of the tax implications inherent in particular transactions is 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 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. However, we are prepared to provide the following comments, which may be of assistance to you.

As described in paragraphs 16 to 18 of Interpretation Bulletin IT-75R3, "Scholarships, Fellowships, Bursaries, Prizes, and Research Grants", amounts received as prizes, grants or other similar amounts in respect of an achievement in a field of endeavour ordinarily carried on by the recipient are generally taxable under paragraph 56(1)(n) of the Act unless they are received:

• by virtue of an office or employment (pursuant to subsection 5(1) or paragraph 6(1)(a) of the Act); or
• by virtue of a profession or business (pursuant to subsection 9(1) of the Act).

Pursuant to subsection 56(3) of the Act, the total amount to be included under paragraph 56(1)(n) of the Act may be reduced by the greater of $500 and the total of any expenses incurred by the athlete for the purpose of fulfilling the conditions under which the amount was received. However, such expenses cannot include:

1. personal or living expenses other than expenses in respect of travel, meals and lodging incurred in the course of earning the income where the athlete was required to be absent from the athlete's usual place of residence,

2. reimbursed expenses, and

3. expenses, which are deductible in computing the athlete's income under another provision of the Act.

Based on the information you provided, in our view the XXXXXXXXXX incentive programs would be taxable as prizes under paragraph 56(1)(n) unless they are otherwise taxable as business or employment income.

The publications referred to in this letter may be obtained from your local tax services office or from our Internet web site (www.ccra-adrc.gc.ca).

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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