CRA recently released a letter which discusses whether cash prizes awarded to Olympic athletes should be taxed. CRA stated that a cash prize does not qualify as a prescribed prize and provided the following comments:

“However, under the Income Tax Act, all amounts a taxpayer receives in a tax year as, or on account of, a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer, other than a prescribed prize, must be included in the taxpayer’s income for that tax year. The performance awards athletes receive from programs like the Athlete Excellence Fund do not qualify as a prescribed prize. However, in many cases, the performance awards may be contributed to an amateur athlete trust. The funds held in the trust are not taxable until the date they are distributed to the athlete or eight years after the last year in which the athlete was eligible to compete as a Canadian national team member.”

Here is a copy of the letter: CRA letter on Prescribed Prizes for Olympic Athletes (PDF)