Question

Graham has accepted an offer to do graduate work in the chemistry department at StateUniversity. The chemistry department offered Graham a $5,000 tuition reduction and$3,500 toward the cost of room and meals. Under the terms of the scholarship Grahammust work in the chemistry labs during the summer as a research assistant. What amountmust Graham include in his gross income?

A)$5,000
B)$2,500
C)$3,500
D)$8,500
E)Zero - none of the above benefits is included in gross income.

Answer 1

The answer is: C)$3,500

Step-by-step explanation:

According to the general rule section 117(d)(1), tuition reductions are not included in the gross income. So the $5,000 tuition reduction will not be included in Graham's gross income.

Graham only has to record as income the $3,500 he will get to cover the costs of room and meals.