Question

Bobby received a $3,500 scholarship for the semester. He used $3,000 to pay tuition to the community college, and the remaining $500 was paid toward textbooks. How much of the scholarship must be included in gross income?

Answer 1

The entire $3,500 scholarship must be included in Bobby's gross income.

Step-by-step explanation:

To determine how much of the scholarship must be included in gross income, we need to consider the types of expenses that are qualified education expenses and the requirements set by the IRS. According to IRS rules, qualified education expenses include tuition, fees, books, supplies, and certain equipment required for enrollment or attendance at an eligible educational institution. In Bobby's case, he used $3,000 to pay for tuition and $500 for textbooks. Since both of these expenses are qualified education expenses, the entire $3,500 scholarship must be included in Bobby's gross income.