Please help me understand this better...

[Julie Deane]

Thanks Joan and Michelle -

After some thought, I have come to this same conclusion, so if they want my painting, I will consider it a sale (for just the reasons you mentioned, Joan). I agree that a true contest would not ask for the paintings to keep.

And since the state of Georgia does not require a church to pay tax on an item meant for worship, it would be a nontaxable sale -
(I love the internet - who would have thought years ago about being able to look up laws and regulations from your own home!).

[Chris Saper]

It sounds a lot like a "purchase award" , common to a lot of competitions. I'd suspect a call to the organizers would be helpful. If my poor memory serves right, it seems to me that groups like the Pastel Society of America, and maybe the Bennington Center for the Arts have purchase awards where you need to choose whether your entry will be eligible or not for a purchase award. Often the amount of the award is far less than a potential sales price.

And you're right , the tax exempt status of churches and the like obviates the issue in this example. It's just income.