Facts:
• Sabrina Student is a full-time student at Florida International University (FIU)
• She has been awarded a $20,000 scholarship
• School costs in the current year are as follows: o $14,000 tuition costs o $300 required lab fees (required for physics class) o $1,000 required books and supplies o $4,800 room and board
• Sabrina asked me, an FIU graduate and Certified Public Accountant of the state of Florida to advise her regarding the tax consequences of the scholarship.
Issue and Conclusion 1
Is Sabrina a resident/citizen of the United States or is she from a foreign country?
Since no information stating otherwise, it is assumed that Sabrina is a US resident/citizen.
Analysis 1
The treatment of the scholarship will depend on whether …show more content…
Even if the $1,000 were used to pay for athletic or other fees to maintain enrollment at the educational institution; if they are not qualified tuition or related expenses, then they do not qualify.
Issue and Conclusion 4
What is the amount included in line 7 of Form 1040 as taxable income?
The amount reported in line 7 of Form 1040 will be $4,700.
Analysis 4
As it has already been established, tuition costs, required lab fees and required books and supplies are excluded from taxable income; however, the remaining $4,800 of room and board need to be reported. When all the expenses are added, the sum is $20,100, which exceeds the amount received from the scholarship by $100. Assuming Sabrina applied the scholarship to the school expenses and the remaining $4,700 to room and board ($20,000 - $14,000 - $300 - $1,000). As such, $4,700 will be reported on line 7 of form 1040 as taxable income, this amount is net of the $100 out-of-pocket cost paid by Sabrina.
Issue and Conclusion 5
Will Sabrina have a filing requirement for 2015?
Yes, she will need to file Form 1040- U.S. Individual Income Tax
• Sabrina Student is a full-time student at Florida International University (FIU)
• She has been awarded a $20,000 scholarship
• School costs in the current year are as follows: o $14,000 tuition costs o $300 required lab fees (required for physics class) o $1,000 required books and supplies o $4,800 room and board
• Sabrina asked me, an FIU graduate and Certified Public Accountant of the state of Florida to advise her regarding the tax consequences of the scholarship.
Issue and Conclusion 1
Is Sabrina a resident/citizen of the United States or is she from a foreign country?
Since no information stating otherwise, it is assumed that Sabrina is a US resident/citizen.
Analysis 1
The treatment of the scholarship will depend on whether …show more content…
Even if the $1,000 were used to pay for athletic or other fees to maintain enrollment at the educational institution; if they are not qualified tuition or related expenses, then they do not qualify.
Issue and Conclusion 4
What is the amount included in line 7 of Form 1040 as taxable income?
The amount reported in line 7 of Form 1040 will be $4,700.
Analysis 4
As it has already been established, tuition costs, required lab fees and required books and supplies are excluded from taxable income; however, the remaining $4,800 of room and board need to be reported. When all the expenses are added, the sum is $20,100, which exceeds the amount received from the scholarship by $100. Assuming Sabrina applied the scholarship to the school expenses and the remaining $4,700 to room and board ($20,000 - $14,000 - $300 - $1,000). As such, $4,700 will be reported on line 7 of form 1040 as taxable income, this amount is net of the $100 out-of-pocket cost paid by Sabrina.
Issue and Conclusion 5
Will Sabrina have a filing requirement for 2015?
Yes, she will need to file Form 1040- U.S. Individual Income Tax