TR wrote:
- quote -

fellowship that Congress has not provided for an exemption from
taxes. As such, any amount you receive that is not used for
qualified educational expenses is taxable income. Qualified ed.
expenses include required tuition and fees to enroll and/or
attend the school plus any other course related fees, books,
supplies and equipment. Any amount not spent on the preceding is
taxable.

The open question is whether the taxable amount is subject to SE
tax or whether you just add the amount to Line 7 of your tax
return with the designation SCH. As long as you are not required
to provide services as an independent contractor, then the
taxable amount is not subject to SE tax. The nature of the NDSEG
fellowship is that certain fellows are required to perform
services. These fellows would be subject to SE tax on any amount
of a stipend paid for services. The memo informs these fellows
that their employment is not as an employee or a part-time
employee but rather as an independent contractor and is subject
to SE tax. Note, that payment for services includes both past,
present and any future obligation you might have.

You state that you were not required to perform services.
Therefore, you report the taxable amount on Line 7 of your tax
return.

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Recipients of National Defense Science and Engineering Graduate
Fellows receive the memo posted at: <https://www.asee.org/ndseg/upload/
2007-Tax-Memo.pdf> .

The line "As stated in the NDSEG Terms and Conditions, you are
considered an independent contractor, and not self-employed, and are
not employed by either the United States Government or ASEE." confuses
me.

In particular, I am having trouble reconciling that statement with:
"Schedule SE (Form 1040). Include amounts you receive under a
scholarship as pay for your services as an independent contractor in
determining your net earnings from self-employment. If your net
earnings are $400 or more, you will have to pay self-employment tax.
Use Schedule SE, Self-Employment Tax, to figure this tax" from Pub
970.

No particular service is required under the terms of the fellowship.
The fellow simply must remain enrolled in an eligible graduate
program. Given that, what does it mean to call the fellow an
independent contractor?

My bottom line questions, I suppose, come down to (1) Does and NDSEG
fellow have to pay self-employment taxes? (2) Particularly if the
answer is "yes," would the fellow be eligible to file a Schedule C and
deduct costs associated with his or her studies? More generally, how
will NDSEG income be treated for federal tax purposes?

TIA

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >