Which of the Following Would Render an Otherwise Nontaxable Scholarship/fellowship

question 71

Multiple Choice

Which of the following would render an otherwise nontaxable scholarship/fellowship at least partially taxable: I.The recipient is engaged in a post-doctoral research effort (i.e., not a degree candidate) .
II) The recipient used scholarship proceeds to pay for books
III) The recipient used scholarship proceeds to pay for room and board.

• A)I.only
• B)III.only
• C)I.and II.only
• D)I.and III.only
• E)I., II.and III.

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Definitions:

Capital Structure

The mix of a company's long-term liabilities, specific short-term liabilities, common equity and preferred equity, which funds its overall operations and growth.

Interest Tax Shield

The reduction in taxable income for individuals or corporations achieved by deducting interest payments on borrowed funds.

M&M Proposition II

A theory proposing that the cost of equity increases as a company increases its leverage, due to the riskier equity stream.

Debt-Equity Ratio

A ratio assessing the comparative financing from equity and debt for a company’s assets.