I am a part-time H1B visa holder, and am also an artist.
I have received some grant money, but I am not sure if it's even legal to receive this type of money... outside of my legal H1B employment, I am not suppoese to earn moneny, but I was also told receiving money as "gift" is legal.
Who should I contact to be advisied what is illegal and not? (My immigration lawyer says it's out of her area, and I may have problem getting different visa or Green card in the futre if I get audited and my tax record is not clear).

How can I find out what and how much is legal to receive as grants, artist stipend, sholarship, or gift,, and how can I pay tax?

It's not illegal to receive a gift but a grant is not a gift. Your immigration attorney should know the answer to this question because it is an immigration question, not a tax question. The tax answer is easy: your grant is taxable unless we're talking about a scholarship where some of it might not be taxable.

The immigration question is whether receiving income from someone other than your H1B sponsor violates the terms of your visa. Your immigration attorney should know that the answer to this question is: Yes.

I answered this question via email, and I agree with TTE that it IS probably a violation of the provisions of your H-1 visa.

But I do not feel that it would be a SERIOUS violation, because you could argue that the work as an artist is more of a hobby that happens to produce a net profit rather than a serious business venture.

Still, this is a question BEST answered by an immigration attorney.

Regardless of his answer, you STILL must pay the appropriate taxes on the artist income, be it from the sale of the art or from the grants.