Alejandro was awarded an academic scholarship to StateUniversity for the 2008-20

Question

Alejandro was awarded an academic scholarship to StateUniversity for the 2008-2009 academic year. He received $5,000 inAugust and $6,000 in December 2008. Alejandro had enough personalsavings to pay all expenses as they came dure. Alejandro’sexpenditures for the relevant period were as follows:

Tution, August 2008 $3,300

Tuition, December 2008 3,400

Room and board

August-December 2008 3,000

January-May 2009 2,400

Books and education supplies

August-December 2008 1,000

January -May 2009 1,200

Determine the effect on Alejandro’s gross incomefor 2008 and 2009

Explanation / Answer

Alejandro received a total of $11,000 and spent $8,900 ($3,300 + $3,400 + $1,000 + $1,200) on tuition, books, and supplies. The amount received for room and board is not excludible. Therefore, he must include $2,100 ($11,000 – $8,900) in gross income. When he received the money in 2008, Alejandro’s total expenses for the period covered by the scholarship           were not known. Therefore, he is allowed to defer reporting the income until 2009, when all the uncertainty is resolved.

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