First, let's clarify that we are talking about a son or daughter. As the Journal of Accountancy article discusses, other relatives follow different rules.
ALL scholarships are part of support. It does not matter if it is taxable or not. Support means money paid for a person's expenses. It does not matter if it is taxable income, nontaxable income, from a savings account, from a third party, or whatever else. It is ALL money spent, regardless of the source. See Line #1 on this Support Worksheet:
<a rel="nofollow" target="_blank" href="
https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf...>
Scholarships are part of support, but we discussed above, §152(f)(5) specifically says it is NOT considered as the student paying their own support. It is considered as somebody else paying their support. Here is the link from Publication 501 about that: <a rel="nofollow" target="_blank" href="
https://www.irs.gov/publications/p501#en_US_2017_publink1000220916">https://www.irs.gov/publications...>
So a child may receive scholarships which is part of support. But it is NOT considered as the child paying for their own support, it is considered as a third party paying their support.
In most cases, in order for a child to claim his own exemption (and not be a dependent of the parents), the child must pay over 50% of his own support. Because scholarships are considered as being paid by a third party, it is extremely unlikely that the student would have paid for over 50% of his own support. Therefore, the child would be a dependent of his parents.
Definitions in the Tax Code usually only apply to that specific section. It does NOT necessarily apply to other sections of the Tax Code, which may have different definitions. Earned Income is one of those things.
For purposes of the Kiddie Tax, the Tax Code definition of "Earned Income" is in §1(g)(2)(A)(ii)(II), which points to §911(d)(2) for the definition. Here is that definition of Earned Income (for purposes of the Kiddie Tax):
"The term “earned income” means wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered". (It does go on to clarify a few details, but that does not change this definition).
<a rel="nofollow" target="_blank" href="
https://www.law.cornell.edu/uscode/text/26/1#g:">https://www.law.cornell.edu/uscode/text/26/1#g:</a>
<a rel="nofollow" target="_blank" href="
https://www.law.cornell.edu/uscode/text/26/911#d">https://www.law.cornell.edu/uscode/text/26/911#d</...>
Scholarships are NOT "wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered", so they are subject to the Kiddie Tax. The Instructions for Form 8615 (Kiddie Tax) repeat that, and specifically state that taxable scholarships are subject to Kiddie Tax.
<a rel="nofollow" target="_blank" href="
https://www.irs.gov/instructions/i8615#idm140023474969936">https://www.irs.gov/instructions/i8615#id...>
