11 January 1990 Income Tax Severed Letter AC745837 - Canada Council Project Grants

JAN 11 1990

Current Amendments and               Business and General
  Regulations Division                 Division
B.J. Bryson, Acting Director         G. Thornley
                                     957-2101

N.M. Sheerin

Canada Council Project Grants        7-4583

This is in reply to your memorandum of December 12, 1989, and further to our telephone conversations concerning your request that we confirm the basis for taxing Canada Council project grants received by artists.

We confirm the view set out in the fourth paragraph of your memorandum that such grants, where not taxable as business income or as employment income, are considered taxable under paragraph 56(1)(n) of the Income Tax Act (the "Act") as a prize.

In order to receive such a grant the artist must have received formal training in his or her field of art, he or she must have worked at their art full time and must have had one solo exhibition at a professional level a year or more after the completion of training (see page 21 of the Canada Council Grants to Artists publication). Thus the awarding of the grant can be seen as "a prize for achievement in field of endeavour ordinarily carried on by the taxpayer". A prize in this sense, as set out in paragraph 6 of the Special Release to IT-75R2 , is an award given to a particular person selected from a group of potential recipients for something accomplished, attained or carried out successfully.

                  21(1)(b)

                  Nevertheless, in our view the majority of
Canada Council and similar grants, if neither business nor
employment income, should be taxable pursuant to paragraph
56(1)(n) of the Act (in the absence of a more specific provision
such as draft paragraph 56(1)(n.1) of the Act).

                  21(1)(b)

We trust this is the information you require.

B.W. Dath Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch