From: AlanBaggett@volcanomail.com   
      
   Olympic Tax? :CRA SOTW   
      
   Article by Lisa Handfield   
   Moodys Gartner Tax Law LLP     
      
   We here at Moodys Gartner are caught up in the Olympic fever (Go Canada   
   Go!)...but like always we are thinking about tax!  One controversial aspect is   
   the tax that Olympic athletes pay on their prize money.  Yes, Canadian and   
   American athletes are given    
   prize money from their country's Olympic governing committee for winning an   
   Olympic medal.  In Canada, the Canadian Olympic Committee awards athletes with   
   $20,000 for a gold medal, $15,000 for a silver medal and $10,000 for a bronze   
   medal.  The Minister    
   of National Revenue has disclaimed the right to tax the value of the medal   
   itself.  Similarly, in the United States, Olympic athletes are awarded $25,000   
   for a gold medal, $15,000 for a silver medal and $10,000 for a bronze medal   
   from the U.S. Olympic    
   Committee.  Surprisingly, athletes in both Canada and the US are subject to   
   taxation on this prize money at their own marginal tax rate.  In Canada, the   
   prize money is subject to tax as it is not exempt by Regulation 7700 of the   
   Regulations to the Income    
   Tax Act (the "Act").  In the US, the prize money is considered earned income   
   abroad and at the federal level an athlete in the top tax bracket will pay   
   close to $10,000 for a gold medal win.  Texas GOP Rep. Blake Farenthold has   
   re-introduced the TEAM Act    
   (Tax Exemptions for American Medalists Act) which would exempt US Olympic   
   athletes from paying taxes on the medals and accompanying prize money.  Many   
   countries do not tax athletes on their Olympic winnings, for example India, so   
   why do we?   
      
   From a technical perspective, Regulation 7700 of the Act exempts certain prize   
   money from taxation.  This provision was added to the Act so that Nobel Prize   
   winner Dr. John C. Polanyi would not face tax on his prize.  The provision   
   appears to have been    
   added due to public sentiment. Is there not similar public sentiment for   
   Olympic athletes?  Regulation 7700 only exempts those monies awarded in   
   relation to meritorious achievement in the arts, sciences or service to the   
   public, not sports.  Some have    
   raised the point that Olympic athletes may provide a public service as they   
   indirectly promote a sense of nationalism; however, that is not the current   
   view of the Canada Revenue Agency (see CRA document 2008-0300071M4).    
      
   One argument could be that athletes are already getting money in the form of   
   funding from the various levels of government.  The federal government   
   provides about $62 million in annual funding to the Own the Podium program.    
   Provincial governments    
   contribute varying amounts to sports programs, for example Quebec provided   
   approximately $2.6 million to amateur sports in 2012-13 while Alberta provided   
   only about $159,000.  In addition, Quebec provides a tax credit of $6,000 to   
   carded athletes.  Given    
   that many athletes devote their life to training and have numerous expenses   
   such as equipment, coaches and the like, it is likely that if athletes were   
   running a business, they would be bankrupt!  Not convinced this argument is   
   very compelling.   
      
   Interestingly, Canada passed a provision in the Act, specifically subsection   
   115(2.3), that exempted income earned in Canada in connection with the 2010   
   Vancouver Olympic and Paralympic Winter Games for athletes from countries   
   other than Canada, games    
   officials and foreign media.  Why would Canada give up the right to tax income   
   of non-residents earned in Canada but tax its own athletes on the nominal   
   prize money?    
      
   How much tax is the Canadian fisc really losing?  In Vancouver, Canada won 26   
   medals, although granted some of these are team medals (i.e, hockey and   
   curling), so for easy figuring let's assume that there were 100 medals awarded   
   to Canadian athletes at    
   an average of $15,000 - that's $1.5 million of revenue.  Most athletes are not   
   fortunate enough to be a household name and a professional sports star like   
   Sidney Crosby, so let's assume they are on average in a middle tax bracket,   
   say 22%, then the fisc    
   is out approximately $330,000 - not a whole lot of money in the big scheme of   
   things!    
      
   Oh well....Go Canada Go!   
      
   Moodys Gartner Tax Law is only about tax. It is not an add-on service, it is   
   our singular focus. Our Canadian and US lawyers and Chartered Accountants work   
   together to develop effective tax strategies that get results, for individuals   
   and corporate    
   clients with interests in Canada, the US or both. Our strengths lie in   
   Canadian and US cross-border tax advisory services, estateplanning, and tax   
   litigation/dispute resolution. We identify areas of risk and opportunity, and   
   create plans that yield the    
   right balance of protection, optimization and compliance for each of our   
   clients' special circumstances.   
      
   The content of this article is intended to provide a general guide to the   
   subject matter. Specialist advice should be sought about your specific   
   circumstances.   
      
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