Please help me understand this better...

[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.