Question

The taxpayer is a Ph.D. student in accounting at City University. The student is paid $1,500 per month for teaching two classes. The total amount received for the year is $13,500. a.The $13,500 is considered a scholarship and, therefore, is excluded. b.The $13,500 is excluded because the total amount received for the year is less than her standard deduction and personal exemption. c.The $13,500 is taxable compensation. d.The $13,500 is excludible if the money is used to pay for tuition and books.

Answer 1

Answer: c. The $13,500 is taxable compensation.

Step-by-step explanation:

The $13,500 received is to be considered a taxable compensation because amounts paid for teaching or research, even to students, should be included in the gross income calculation which makes it a taxable compensation.

There are some exceptions to this however such as income from the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program but this does not apply here.