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I.R.S. Apparently Is Scrutinizing Student Compliance With Tax Law

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WASHINGTON--A request by the Internal Revenue Service for scholarship records from Harvard University has raised the possibility that the agency may be more closely scrutinizing students' compliance with a law making some scholarship money subject to federal income taxes.

At the request of the I.R.S., Harvard officials have given the agency records on an estimated 3,500 scholarship recipients, a lawyer for the university said last week.

The lawyer, Marianna Pierce, said "it was never quite clear'' why the I.R.S. had requested the information.

But since passage of the Tax Reform Act of 1986, college-scholarship aid used for such expenses as room and board has been considered taxable income. Scholarship money used for strictly educational expenses--tuition, fees, books, and supplies--has remained nontaxable.

At least until now, the I.R.S. has not made an effort to investigate students' compliance with the law, according to higher-education officials.

Dallas Martin, the executive director of the National Association of Student Financial Aid Administrators, said last week that "schools across the country made a good-faith effort to comply with the law'' and to notify students of their responsibility to report scholarship money that is considered income.

Therefore, Mr. Martin said, "I was a little surprised to see what was brewing here'' with the request to Harvard.

Ms. Pierce said the federal agency asked for the gross number of Harvard students who received scholarships in 1989, all of whom were notified first by the university, and then for information on specific students. Not all of the 3,500 recipients will be targeted, she said.

The I.R.S. officials did not indicate how they would use the information, Ms. Pierce added.

An I.R.S. spokesman, Wilson Fadely, would neither confirm nor deny that the agency had requested the information from Harvard. But, he said, "We have no nationally coordinated compliance campaign or effort targeting scholarship recipients.''

Mr. Martin of the financial-aid association said that students attending public institutions, where tuition is typically much lower than for private colleges but where room-and-board expenses are somewhat more comparable, could be more liable than their private-school counterparts for reporting scholarship money as income.--M.P.

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