It is a gift handed down by a rich parent — the parent in this case is the university. There is no difference. Someone is handing you thousands of dollars and they say: “here is some money for your school, in order to keep getting this money, you have to get good grades and volunteer as a teaching assistant.” How is that any different than a rich parent giving you the same money with the same conditions? At the end of the day, some benefactor is handing you a pile of money to get an advanced degree.

It seems you may be unfamiliar with STEM Ph.D programs. The way it works is professors "sponsor" a graduate student to do reserach for them. The student will either work on existing projects started within that professor's lab or start their own related projects. The goal of this research is to contribute novel material into scientific literature.

It's also usually NOT a rich parent. For example a big funder is NSF or NIH, these institutions grant money to labs with the expectation that they will perform research.

Don't think of it as being paid to go to class, think of it as a job where you work 40 hours a week (usually way more) doing reserach, then go to class, then on top of that help teach those classes through being a TA.

Those cases really should count as earned income then.

Indeed, and I'm surprised it wouldn't be. When I was a graduate student we got tuition waivers but beyond that it was a salary for being a teaching or research assistant. TAs were definitely considered employees, because they were also union-represented.

That’s the standard, not the exception, for PhDs. Which is why it’s not really “those cases” that should be earned income - its the entire category.

Graduate students work to earn their keep. They are more properly treated as employees: https://www.npr.org/sections/thetwo-way/2016/08/23/491090762...

Are you telling me you have a hard time discerning between a trust fund and an educational grant or stipend?

From a taxation perspective, yes. If it’s earned income, then the university should put the “student” on a W2 and pay then as such. Otherwise, it’s unearned income and I mean “unearned” in terms of tax treatment; that doesn’t imply that it isn’t deserved. A day trader makes unearned income, but nobody could argue that doing that isn’t “work.” But the IRS still considers that also unearned.

I am all in favor of cutting taxes on unearned income. However ironically, those most opposed to that also like to complain when it’s their unearned income being taxed as in the case of a stipend or fellowship.

shouldnt the annual gift exclusion of 15k apply then?