Question

Use a tax service such as “United States Tax Reporter”, to answer the following questions: a. Assume a public university provides a $20,000 athletic scholarship to an athlete to cover tuition, books, a computer, and extra tutoring costs, does the athlete have gross income? b. Cantheathletededucthisorherexpensesforsuchitems as clothing, meals, and attending a summer fitness camp

Answer 1

First of all you must be very clear to note that, scholarship money will not form part of gross income and is cannot be brought into the ambit of taxability.

And now coming to deductibility, it is a question which arises when the scholarship is included in the gross income but which is not.

However the scholarship must be used for the purpose intended and if not it may be included in the gross income and only to such extent which is used for the intended purpose will be deductible.