Joanna Gaynes was an amazing high school student and so it was no great surprise when she was accepted into Prestige Private University (PPU). To entice Joanna to attend PPU, the school offered her a reduced tuition of $13,000 per year (full-time tuition would typically be $43,000 per year). PPU also has a scholarship program thanks to a large donation from William Gatos. Joanna was the Gatos Scholarship winner and will receive a scholarship for $20,000. Joanna is required to use the scholarship first to pay her $13,000 tuition and the remainder is to cover room and board at PPU. Lastly, PPU also offered Joanna a part-time job on the PPU campus as a student lab assistant in the Biology Department of PPU for which she is paid $1,500.Required: Go to the IRS website (www.irs.gov) and locate Publication 970. Review the section on Scholarships.

Required: Write a letter to Joanna Gaynes stating how much of the PPU package for Joanna is taxable.

Sample Letter:

Sample Letter Format:

Whittenburg, Altus-Buller and Gill, CPAs

Boulder, CO

July 20, 20xx

Mr. and Mrs. Haybarker

105 Red Fish Drive

Port Mansfield, TX

Dear Mr. and Mrs. Haybarker,

Thanks for requesting my advice concerning the donation of your 2014 Maverick Micro flats boat to Trout Unlimited. I have researched your question and am happy to say that you will be able to claim a charitable deduction for the boat.

The IRS allows a deduction equal to the fair market value of the boat at the time of the donation. However, special rules apply when donating used vehicles or boats. You cannot claim a deduction greater than the amount that Trout Unlimited actually sold the boat for.

Trout Unlimited should provide you with the resale information on Form 1098-C. You must attach this form to your tax return in order to substantiate the deduction. If Trout Unlimited does not sell the boat but instead uses it, you may claim an estimated value for the boat. If this is the case, Trout Unlimited must certify that this exception applies.

My conclusion is based upon the facts that you have provided me. If you have any questions or would like further explanation, please dont hesitate to call.

Sincerely,

Tevor Malcolm

for Whittenburg, Altus-Buller and Gill, CPAs