1. Assume the same facts as in problem 27, except that Earl is not a residence hall assistant and his general scholarship is for 10,000.

2. Fawn receives a $2,500 scholarship to State University. Discuss the taxability of the scholarship under each of the following assumptions:

a. The scholarship is paid from a general scholarship fund and is awarded to students with high academic potential. Recipients are not required to perform any services to receive the scholarship.

b. The scholarship is paid by the finance department. Recipients are required to work 10 hours per week for a professor designated by the department.