Majors, a candidate for a graduate degree, received the following
scholarship awards from the university in 2013:

• $10,000 for tuition, fees, books, and supplies required
for courses.

• $2,000 stipend for research services required by the
scholarship.

What amount of the scholarship awards should Majors include as
taxable income in 2013?

(c) The requirement is to determine the amount of
scholarship awards that Majors should include as taxable income
in 2013. Only a candidate for a degree can exclude amounts
received as a scholarship award. The exclusion available to degree
candidates is limited to amounts received for the payment of
tuition and fees, books, supplies, and equipment required for
courses at the educational institution. Since Majors is a candidate
for a graduate degree, Majors can exclude the $10,000 received
for tuition, fees, books, and supplies required for courses.
However, the $2,000 stipend for research services required by the
scholarship must be included in taxable income for 2013.