If a Tuition Reduction is Taxable, What’s the Measure of Income?

Journal of Taxation of Investments, Summer 2018, at 63

Case Legal Studies Research Paper No. 2019-4

Posted: 20 Feb 2019

See all articles by Erik M. Jensen

Erik M. Jensen

Case Western Reserve University School of Law

Date Written: February 19, 2019

Abstract

This article considers what the measure of income should be if a tuition reduction is taxable, and it challenges the idea that an educational institution’s stated tuition figure should control in that determination. It’s the value of the reduction, not the dollar difference between sticker price and the tuition actually paid by a particular student, that is potentially income, and the article suggests one reasonable method that might be used to determine that value. Although the focus of the article is on tuition reductions, the argument applies just as well to other situations in which a price reduction (or what in form looks like a price reduction) is taxable.

Keywords: qualified tuition reduction, scholarship, Section 117(d), valuation

JEL Classification: K34

Suggested Citation

Jensen, Erik M., If a Tuition Reduction is Taxable, What’s the Measure of Income? (February 19, 2019). Journal of Taxation of Investments, Summer 2018, at 63; Case Legal Studies Research Paper No. 2019-4. Available at SSRN: https://ssrn.com/abstract=3338021

Erik M. Jensen (Contact Author)

Case Western Reserve University School of Law ( email )

11075 East Boulevard
Cleveland, OH 44106-7148
United States
216-368-3613 (Phone)
216-368-2086 (Fax)

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