Thank you, this is very helpful. May I please ask a follow-up just so I am clear. Suppose a college-bound high school senior receives a $1000 cash graduation present from Grandma as well as a $1000 scholarship from a local civics organization. Student applies both to room and board at college. I assume the gift from Grandma would not be taxable? And yet the scholarship would be? If so, then would the reason be that unlike Grandma's gift, the scholarship was given as a scholarship and for no other reason, and is thus treated differently under the tax law?
What if Grandma writes a note with her gift stipulating that this money is to be used for college? Does that make her $1000 a scholarship just like the other scholarship, so now Grandma's gift is taxable?
Again, just trying to understand. Thanks, this board is a great resource.
