A graduate student is partially taxed on a fellowship grant that he received while pursuing a doctorate in biophysics at Harvard, the Tax Court says. The grant paid all of his tuition and school fees and provided him with a cash stipend of over $18,000, which he claimed he used to pay off student loans and other expenses related to his studies.
But student loan repayments aren’t treated as qualified expenses, and he didn’t prove that the other costs were course related, so the stipend is taxed. The balance of the fellowship is tax free.
Although the IRS audited him in a prior year on the same issue and made no changes, that doesn’t bar the agency from asserting in this case that a portion of the stipend is taxable (Wang, TC Summ. Op. 2014-39).