I really do appreciate your help on this. Please forgive me for keep coming back!
In my original question, I asked if I was correctly calculating her federal tax to be in the order of $8000. on a $45000. scholarship and I interpreted your answer to be "yes". You went on to talk about the "loophole". You have helped me with definitions of support etc. I have been through the various instructions and publications; I have not yet run TT. I am left with the following questions:
Assuming her folks can claim her as dependent, they can get back up to $2500. on their return. If she files her return with the $8000. the benefit is to save $2500. of the $8000.? If she adds to her income per your suggestion (to enable the parents to get nearer the $2500), her tax will increase?
It still sounds to be a horrendous tax!!
Am I still missing something?
