Discussion:A Section 117 Question

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Maweiss81 (talk|edits) said:

2 December 2006

I would GREATLY appreciate any help on the question below (I know I must be missing something because I am confused as to allocate the Student’s work money between his Room and Board and Tuition):

Question: Student is working towards a B.A. and receives a $6,000 scholarship for tuition and room and board, half and half. The student is required to do about 300 hours of research for an assigned professor for $10/hour. What are the tax consequences:

Here is the way in which I worked out the tax consequences:

Scholarship for Room & Board: $3,000 - included in GI Qualified Scholarship for Tuition - $3,000- excluded from GI

Student’s Required Work - $3,000 ($10/hr. for 300 hours) –included in GI (not a qualified scholarship under IRC s.117, as it requires work and is considered compensation):

THE QUESTION THAT IS DRIVING ME CRAZY: whether Student’s work was for room & board or for tuition or for both (and both-how is it allocated): If Student’s work was for Room & Board - $3,000 already included in GI (I think this is best for student) If Student’s work was for tuition- $3,000 of tuition scholarship is now included in GI If Student’s work money is split equally: $4,500-Room & Board is included in GI and $1,500 – Qualified Scholarship for Tuition is excluded from GI When I allocated the Student’s work money, I assumed that I should split the value of the work and then add it equally to Room and Board and Tuition.

I am thankful for anyone who can help me clarify this (I have a tax final coming up soon).

Sincerely,

Melissa