FACTS:
Andrew smith is a freshman at a university of Texas and he recently met with you to discuss his tax situation. Based on his academic record in high school, Andrew was awarded a $10,000 scholarship by a local bank in January 2015. According to the terms of the scholarship, the money can be used for any educational expenses, including room and board. Thus, the scholarship is considered unrestricted. During 2015, Andrewspent $7,100 on tuition and required fees, $1,000 for books, and $7,500 for room and board.
Answer the following questions using the RIA tax service website research:In your letter, you should describe the tax rules for scholarships and the education credits. Please state note the RIA research citations.https://checkpoint.riag.comUSER NAME: NVFTXS0-15 password: jackie01
Andrew is concerned that he might have to pay taxes on the scholarship, and he has come to you for advice.Assume Andrew is a dependent and that he did not work during the year (2015). His parents have an adjusted gross income of $100,000.
1) He also wants to know if he is eligible for any education credits.
2) What is the tax treatment of the scholarship?
3) Is Andrew required to include it as income on his tax return?
4) Is Andrew eligible for the education credits?
https://checkpoint.riag.com USER NAME: NVFTXS0-15 password: jackie01
Write a letter to Andrew with your response. In your letter, you should describe the tax rules for scholarships and the education credits.