Fellowship payments used for incidental expenses, including room and board, travel, and optional equipment are taxable. So too are amounts received for teaching, research, and other services required as a condition for receiving the fellowship. The only exception: amounts received for services required by the National Health Service Corps Scholarship Program or the Armed Services Professional Scholarship and Financial Assistance Program.
The tax on the investment income in excess of $1,700 (may change after 2007) of a child under age 18, based on the parents’ marginal tax rate and computed on Form 8615.