24(1) 900595
M. Eisner
(613) 957-2138
Attention:
19(1) Dear Sirs:
This is in reply to your letter of April 25, 1990 concerning whether certain cash awards are income in the hands of the recipients or are tax exempt. We apologize for the delay in our response.
In relation to your concerns you had
24(1)Paragraph 56(l)(n) of the Income Tax Act provides that all amounts received by a taxpayer as or on account of a scholarship, fellowship or bursary, or a prize, subject to an exception which is discussed below, for achievement in a field of endeavour ordinarily carried on by the taxpayer are included in income to the extent that the total of these amounts received in the year exceed $500.
However, this provision does not apply to amounts received out of a registered education savings plan or to amounts that are employment related or business related but all of which would be taxable in any case. Based on the information you provided, we have assumed that these exclusions are not applicable to your situation. For your further information, we note that the Department has made general comments on the application of this provision which are set out in Interpretation Bulletin IT-75R2 , a copy of which has been enclosed.
From the limited information provided to us, it appears that an award in your case could be a scholarship, fellowship, bursary or a prize. It is also possible that some awards might be scholarships, bursaries, or fellowships while others might be prizes. However, the final determination of the nature of an award can only be made when all the relevant facts are known. For general comments on these types of payments, you should refer to paragraphs 3, 8, and IS of IT-75R2 . We also note that scholarships, fellowships, and bursaries are made to enable recipients to advance their education whereas a prize is given to a recipient for something accomplished, attained or carried out successfully (the furtherance of education is not normally a factor).
As mentioned above, there is an exception for a certain type of prize which is described in section 7700 of the Income Tax Regulations. Such a prize is one 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.
Consistent with comments previously, made, it is not possible to provide meaningful comments on the awards given by your 24(1) in relation to this exception. However, with respect to the term "recognized by the general public", we do note that such a prize must be widely known within the Canadian public rather than being generally limited in recognition by artists. Examples of such prizes would be a Nobel Prize or a Governor General's Award.
While we regret that we could not provide you with a definitive opinion, we hope the foregoing comments are of assistance to you.
Yours truly for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch