Question

Hillary Pillary, age 22, is a full-time student at Diploma Mills College and is awarded a master s degree at the end of the current year. Her tuition, fees, books, and supplies are $10,000 for the year. During the year, she received the following payments:

Scholarship for the year $7,000

Loan from college financial aid office $3,000

Cash prize awarded in beauty contest $2,000

Gift from Aunt Sue $1,000

What amount of these payments is taxable to Hillary for the current year?

		$1,000
		$2,000
		$3,000
		$5,000
		$13,000

Answer 1

SOLUTION

Scolarship are not part of taxable income to the extent these are expended on education . Here education expences are $ 10000 and scolarship amount ps $ 7000 hence no taxability arises .

Loan from college is not an income because it is to be refunded .

Any prize received other than amount to be expended on education is taxable . Hence this amount of $ 2000 is taxable .

Gift is not taxable in the hands of receoient .

THUS THE ANSWER IS $2000 ,THIS IS A TAXABLE PAYMENT .

NOTE - PLEASE UPVOTE IT SHALL BE A GREAT FAVOUR THANKS