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:
The Department of Justice has established a Dispute Resolution Award in Law Studies. Its aim is to encourage students to undertake research and writing in, and pursue greater understanding of, the dispute resolution field. The Department of Justice will provide a monetary award in each participating law school for the paper produced that best represents the pursuit of new ideas and excellence in the field of dispute resolution. Participating students must be registered in and regularly attend courses in a law programme at one of the participating law schools. The Department of Justice considers the recommendation and if approved, the student receives a monetary award. The recipient will be sponsored to attend and present the paper at a national conference. Are the monetary awards received by the students and the sponsorship of a student to attend and present his or her paper at a national conference considered income to the recipient?
Position:
Based on information provided, it appears that the monetary award is a prize that is taxable pursuant to paragraph 56(1)(n) of the Act. Whether the sponsorship of the student to attend and present his or her paper at a national conference is taxable under 56(1)(n) is a question of fact.
Reasons: See IT-75R3.
Terry de March
Director
Innovations, Analysis 991156
and Integration Directorate G. Moore
Programs Branch
Department of Justice
284 Wellington Street
6th Floor, East Memorial Building
Ottawa, Ontario
K1A 0H8
May 17, 1999
Dear Mr. de March:
Re: Tax Treatment of Dispute Resolution Award
We are replying to your letter of April 26, 1999, regarding the tax treatment of a Dispute Resolution Award in Law Studies granted by the Department of Justice.
As we understand it, the Department of Justice has established a Dispute Resolution Award in Law Studies. Its aim is to encourage students to undertake research and writing in, and pursue greater understanding of, the dispute resolution field. The intent is also to promote the pursuit of new ideas and excellence in the dispute resolution system design and in the application of dispute resolution approaches and options across the wide variety of subject areas represented in law studies. The Department of Justice will provide a monetary award in each participating law school for the paper produced that best represents the pursuit of new ideas and excellence in the field of dispute resolution. Participating students must be registered in and regularly attend courses in a law programme at one of the participating law schools. The paper can be prepared in the context of a course dedicated to dispute resolution or in other course work. Each law school selects the best paper and makes a recommendation to the Department of Justice. The Department of Justice considers the recommendation and if approved, the student receives a monetary award. Each selected paper will be sent to a "blue ribbon" panel that will review each selected paper and choose the paper that warrants national recognition. An event will be held at the recipient's law school to mark this recognition. The recipient will be sponsored to attend and present the paper at a national conference. You are asking if the monetary awards received by the students and the sponsorship of a student to attend and present his or her paper at a national conference would be considered income to the recipient.
Written confirmation of the 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 70-6R3. Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature.
Paragraph 56(1)(n) of the Income Tax Act (the "Act") generally includes in income all but the first $500 of the total of amounts received in the year as or on account of a scholarship, fellowship, bursary, or prize for achievement in a field of endeavour ordinarily carried on by a taxpayer. Such amounts are included in income in the year received. For each taxation year, only one $500 exemption is available to be applied against all income included under paragraph 56(1)(n) of the Act. Grants received in a taxation year to enable a taxpayer to carry on research or similar work are included in income under paragraph 56(1)(o) of the Act . However, a taxpayer is only required to include in income that part of such grants that exceeds the total of any allowable expenses incurred by the taxpayer in the year for the purpose of carrying on the work. There is no $500 exemption for research grants received.
An individual is required to include in his or her income the amount of a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer (other than a prescribed prize). A prize can be considered to be an award to a particular person selected from a group of potential recipients and given for something that is accomplished, attained or carried out successfully. However, the type of prize contemplated in paragraph 56(1)(n) of the Act is restricted. The criteria for awarding the prize must be such that a recipient is rewarded for success in an area in which the recipient regularly applies effort. Therefore, an amount generally qualifies as a prize for purposes of paragraph 56(1)(n) of the Act if it is paid in recognition of a genuine accomplishment in a challenging area, whether it be of an academic, vocational or technical nature. A prescribed prize, as described in section 7700 of the Income Tax Regulations, is 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 but does not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered. A prescribed prize meeting all of the above criteria is not included in computing the income of the recipient. For example, a Nobel Prize given to a scientist or the Governor General's Literary Award given to a professional writer would qualify as would many community service awards.
It is a question of fact whether the monetary awards granted to law students under the Department of Justice's Dispute Resolution Award in Law Studies Program is taxable under paragraph 56(1)(n) of the Act. However, based on the information provided to us, it appears that the award would be considered to be a prize and, in our view, would be taxable under paragraph 56(1)(n) of the Act.
With respect to whether the sponsorship of the student to attend and present a paper at a national conference would also be taxable under paragraph 56(1)(n) of the Act in the hands of the student, in our view, this is a question of fact that can only be resolved after a review of the circumstances. For example, if the award-winning student is given a nonaccountable allowance in respect of meals and accommodations to attend the national conference, in our view, this allowance would be taxable under paragraph 56(1)(n). However, if accepting the monetary award is subject to the requirement that the award-winning student must attend and present his or her paper at a national conference and the Department of Justice either pays for the student's meals and accommodations or the student receives a reimbursement of expenses for meals and accommodations while attending the national conference from the Department of Justice, it is likely that the sponsorship of the student to attend the conference in these circumstances would not be taxable under paragraph 56(1)(n) of the Act.
I trust my comments will be of assistance to you.
Yours truly,
R. Albert, C.A.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999
Email this Content