Mary and Doug are a married couple supporting their son Jake who is a star Seeker for the Johnston Community College Quidditch team. Jake is a sophomore this year and has been at Johnston for the last year and a half. Jake is also runs a small company out of his dorm room that has profited $3,500 in the last year (Jake will report this on his own tax return). Jake also received a $18,000 scholarship from his school which covered the $9,500 tuition, books, and fees. Room and board was $6,000. The rest was returned to Jake in the form of a refund. Jakes parents are confused. Mary believes the refunded amount is taxable income and Doug believes the refunded amount is not-taxable income. Since Mary and Doug are your clients, they ask you about whether they can continue to claim Jake as their dependent on their tax return. After asking a few questions, you learned that Jake did not provide 50% of his support. Under tax law, you believe he lived with his parents for the entire year (even though he lived on campus at his school for 9 months).

1. Can Jack's parents claim him as a dependent on their tax return?

2. Is the refund from the scholarship taxable for Jack on his tax return?