Question

Advanced Scenario 1: Aiden Smith Interview Notes • Aiden is 19 years old, unmarried, and was a first-year full-time student working on a degree in accounting during 2018. He has never had a felony drug conviction. • Aiden did not provide more than half of his own support and can be claimed as a dependent by his mother. • Aiden’s income was $4,000 in wages working as a part-time cook at a fast food restaurant. • Aiden received Form 1098-T indicating $5,000 for payments received for qualified tuition and related expenses in Box 1. He received $8,500 in scholarships and grants, which was reported in Box 5. • Aiden’s scholarship was used to pay for room and board, tuition, and books. The cost of his books was $845. • Aiden is a U.S. citizen with a valid Social Security number. Advanced Scenario 1:

Test Questions 1. Which of the following statements is true?

a. The portion of the scholarship that was not used for qualified educational expenses must be included in Aiden’s income.

b. The amount spent on books is not a qualified education expense.

c. The taxable portion of the scholarship must be reported on Aiden’s mother’s return.

d. None of Aiden’s scholarship is taxable.

Answer 1

Correct ans- part (a)

Reason :-

a.The portion of scholarship or grants used for qualified educational expense like tuition fees, Books , Supplies , equipment are not taxable. Hence rest are taxable.

b.Then amount spent on books is eligible qualified educational institution expense.

c.Taxable portion of scholarship taxable in the hands of recipient .so here It is in hands of Aiden himself.

d.All Portions of scholarship are not tax exempt only qualified portion is non taxable.