Cathy Coed is a full-time senior student at Big Research University (BRU). Cathy is considered by most as a brilliant student

QUESTION:

Cathy Coed is a full-time senior student at Big Research University (BRU). Cathy is considered by most as a brilliant student and has been given a $ 35,000-per-year scholarship. In the current year, Cathy pays the following amounts to attend BRU:

Tuition …………………………………..…..…………. $26,000

Required Lab Fees ………..……………….…….…….. $300

Required Books and Supplies ………….…..…… $1,000

Room and Board ………………………………………. $7,500

What are the tax consequences (i. e., how much is income) of the $ 35,000 current year’s scholarship to Cathy? In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

ANSWER:

Under §117, any scholarship amount that is used to cover tuition and related expenses will be excluded from gross income. However, any amount that is not used to cover tuition and related expenses should be included in gross income.

Examples of key words:

  • Education,
  • Scholarship,
  • Income,
  • Qualified expenses.

 

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