what amount does mr brown include in taxable income for the year 612677
Mr. Brown, a college student working on a degree in accounting, received the following amounts during the year to pay his expenses:
$4,000 scholarship used for tuition at State University
$1,000 scholarship used for fees and books required by the college, and
$8,000 fellowship used for his room and board
What amount does Mr. Brown include in taxable income for the year?
a. Correct. Mr. Brown must include in income the $8,000 fellowship used for room and board. The $4,000 scholarship used for tuition and $1,000 scholarship used for fees and books are not taxable because these amounts are used to pay for qualified education expenses.
b. Incorrect. The $5,000 representing tuition, fees, and books is a nontaxable scholarship payment because it is used to pay for qualified education expenses. Degree candidates who use scholarship payments to pay for tuition and fees to enroll in an eligible institution and to pay for books required for all students in a course at the eligible institution do not include those payments in income.
c. Incorrect. Only $8,000 of the total $13,000 is taxable. The $8,000 fellowship for room and board is taxable while the $5,000 for fees, tuition, and books is nontaxable because it is used to pay for qualified education expenses.
d. Incorrect. Only $8,000 is taxable. The $1,000 of scholarship payments used for fees and books is being paid for qualified education expenses and thus is nontaxable.