Question

Renee is a full-time student at State University and is claimed by her parents as a dependent. Her only source of income is an $8,000 scholarship ($800 for books, $3,800 tuition, $200 student activity fee, and $3,200 room and board). Renee's gross income for the year is:

a) $8,000
b) $4,000
c) $0
d) $3,200

Answer 1

Renee's gross income would be the part of her scholarship allocated for nonqualified expenses, which in this case is for room and board totaling $3,200. Thus, the correct answer is d) $3,200.

Step-by-step explanation:

The subject of the question is taxation and gross income for a student with a scholarship and how it should be reported for tax purposes. Renee is a student whose scholarship is partly for qualified expenses such as tuition, books, and fees, and partly for nonqualified expenses like room and board. Only the amount allotted for nonqualified expenses is considered taxable income. Renee's gross income for the year is the amount used for room and board, which is $3,200. Therefore, the correct answer is d) $3,200.