Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 57-67

1957-1 C.B. 33

Sec. 74

IRS Headnote

The required filing of a written form and the appearance for a personal interview by a student selected for an award in recognition of his past academic and citizenship achievements, for the purpose of determining the recipients of final awards, do not constitute participation in a contest or proceeding within the meaning of section 74(b) of the Internal Revenue Code of 1954. The award is excludable from gross income.

Full Text

Rev. Rul. 57-67

Advice has been requested whether the required filing of a written form and the appearance for a personal interview, by a student selected for an award in recognition of his past academic and citizenship achievements, constitute participation in a contest or proceeding within the meaning of section 74(b) of the Internal Revenue Code of 1954 and whether the award is includible in gross income.

A corporation makes awards of certificates, trophies, and cash to high school students in a given area for the purpose of encouraging them in their academic and citizenship training. The awards are given primarily in recognition of the students' past achievements in scholastic and citizenship fields. Based on certain judging standards, the faculty of each high school selects a certain number of certificate winners from its student body. They also select a lesser number of trophy winners, who will be judged with winners from other schools for possible cash awards. The students themselves do not apply for consideration for the awards or participate in any function other than their usual student and youth activities. The students selected by the high school faculty as trophy winners are required to fill out a form to be used by the area judging group for determining the possible recipients of cash awards. These trophy winning students are also required to appear for interviews before the area judging group so that some appraisal may be made of their character, personality, cooperation in group discussion, and soundness and logic of thought.

Under the provisions of section 74 of the Code, gross income includes amounts received as prizes and awards, unless such prizes or awards are excludable from gross income under subsection (b). Subsection (b) excludes from gross income those prizes and awards which are made primarily in recognition of religious, charitable, scientific, educational, artistic, literary or civic achievements, but only if (1) the recipient was selected without any action on his part to enter the contest or proceeding, and (2) the recipient is not required to render substantial future services as a condition to receiving the prize or award.

The students, who were first awarded certificates and then trophies, with no action on their part to enter a contest or proceeding, may possibly win a cash a ward for the same prior achievements. The fact that the determination of the recipients of the final, or cash, awards is partially based on personal interviews and written forms does not result in the awards being taxable to the recipients by reason of a participation in a contest or proceeding. The appearances for personal interviews and the filing of written forms are not for the purpose of entering the contest or proceeding.

Accordingly, it is held that the required filing of a written form and the appearance for a personal interview by a student selected for an award in recognition of his past academic and citizenship achievements, for the purpose of determining the recipients of final awards, do not constitute the participation in a contest or proceeding within the meaning of section 74(b) of the Internal Revenue Code of 1954. The award is excludable from gross income.