lottery winnings, and raffle prizes, unless the
circumstances deem that the proceeds are considered income from
employment, business or property, or a prize for achievement. For instance, prizes from
employer-promoted contests could be considered employment
income. See Folio S3-F9-C1 below. The cost basis of property which has been won
as a prize in connection with a lottery scheme is deemed by s.
52(4) of the Income Tax Act (ITA) to be the fair market value at the
time it is won. This means that there is no capital gain if
the prize is subsequently sold, unless it is sold for more than
the amount deemed to be the cost basis. If a person decided
to sell the right to the prize, (e.g., sell a winning $1 million
lottery ticket for $900,000), s. 40(2)(f) of the ITA deems any
gain or loss from this transaction to be nil.
subject to certain exceptions (see Folio S3-F9-C1 below), an amount
received as a windfall. Factors which indicate
that an amount received is a windfall, which are based on The Queen
v. Cranswick, [1982]CTC 69, 82 DTC 6073 (FCA):
the taxpayer had no enforceable claim to the payment,
the taxpayer made no organized effort to receive the payment,
the taxpayer neither sought after nor solicited the payment,
the taxpayer had no customary or specific expectation to receive
the payment,
the taxpayer had no reason to expect the payment would recur,
the payment was from a source that is not a customary source of
income for the taxpayer,
the payment was not in consideration for or in recognition of
property, services or anything else provided or to be provided by
the taxpayer, and
the payment was not earned by the taxpayer as a result of any
activity or pursuit of gain carried on by the taxpayer and was not
earned in any other manner.
Some types of income are not taxable, but must still be
reported on the income tax return and included in income for tax purposes, then
deducted later. Because of this, these amounts may affect some tax credits,
income-tested benefits, and clawbacks. The types of income include the following, which are reported on line
14700 (line 147 prior to 2019) other payments:
The line 14700 income is not deducted until line 25000 (line 250 prior to
2019),
which means it is included in line 23400 (line 234 prior to 2019), net income before adjustments,
which is used to calculate clawback of OAS or employment insurance.
Line 23400 is also used in the calculation of the Canada
Workers Benefit (CWB) (renamed for 2019 from the Working Income Tax
Benefit (WITB), medical expense tax credit, and many other tax credits.