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17 June, 00:44

Hope receives an $18,500 scholarship from State University. The university specifies books, supplies, and equipment, while $10,000 is for room and board. In addition, Hope w campus library and earns $5,000. What is Hope's gross income?

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  1. 17 June, 01:16
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    Hope's gross income = $5000 + $10,000 = $15,000

    Explanation:

    First, we need to highlight what are qualified education expenses especially for tax-free fellowships and scholarships.

    Specifically, the qualified expenses that will be tax exempt will be

    The tuition and fees which are requirements to go to an eligible school or institution

    Other course related expenses required for courses in such institutions such as books equipment and supplies are also tax exempt.

    However, room and board, research travel and other expenses that are not required for courses in the institution are not tax free

    Based on this analysis:

    Hope's initial earning on campus = $5000

    However, $10,000 spent on room and board are not required for enrolment in the school, hence, it will be added to the earnings to make the gross income

    Hope's gross income = $5000 + $10,000 = $15,000
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