Olivia Learner is single and $20$ years old. She cannot be claimed as a dependent on anybody else$$s return. She works as a secretary in a local real estate company part$-$time. Her W$-2$ showed compensation of $$15,000$ with Federal income tax withheld of $$50.$

Olivia attended school as a full$-$time student during the spring and fall semesters. Olivia received a $1098-$T with $$8,500$ in Box $1($Tuition$)$ and $$12,000$ in Box $5($Scholarships and Grants$).$ Olivia also paid $$500$ for books. Olivia had a tuition$-$based scholarship for $$6,000$ and a Federal Pell grant of $$6,000.$

She has never taken the American Opportunity Credit in the past since her grants and scholarships exceeded her tuition and book expenses. Her Form $1098-$T reflects her second year of post$-$secondary school. She has not been convicted of a felony, and her earned income is over half of her support. $$

Scenario $2$

Now assume Olivia came to the Volunteer Income Tax Assistance $($VITA$)$ site where you volunteer as a preparer to maximize her tax refund. Since you have done extensive research on the American Opportunity Credit, you found the following in IRS Publication $970,$Coordination with Pell grants and other scholarships. You may be able to increase your American opportunity credit when the student $($you$,$ your spouse, or your dependent$)$ includes certain scholarships or fellowship grants in the student's gross income. Your credit may increase only if the amount of the student's qualified education expenses minus the total amount of scholarships and fellowship grants is less than $$4,000.$ If this situation applies, consider including some or all of the scholarship or fellowship grant in the student's income in order to treat the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that aren't qualified education expenses such as tuition and related fees.$$

$1.$ What portion of scholarships$/$grants can Olivia potentially allocate to gross income to increase her net qualified education expenses?

a$.$ $$0$

b$.$ $$6,000$

c$.$ $$12,000$

d$.$ None of the above

$2.$ Use the Solver Add$-$in in Excel to figure how much of her grant to allocate to income to maximize her refund. How much grant should she allocate?

a$.$ $$0$

b$.$ $$5,000$

c$.$ $$6,000$

d$.$ $$7,000$

$3.$ How much did the additional taxable grant income increase her:

a$.$ Tentative tax: $$\_\_\_\_\_\_\_\_\_\_\_\_\_$

b$.$ American opportunity credit $($nonrefundable$)$: $$\_\_\_\_\_\_\_\_\_\_$

c$.$ American opportunity credit $($refundable$)$: $$\_\_\_\_\_\_\_\_\_\_\_$

$4.$ How much money did Olivia save by filing her tax return at the VITA site $($Scenario $2)$ compared with Scenario $1?$

$$\_\_\_\_\_\_\_\_\_\_\_\_\_$

$5.$ Provide a screenshot of your solver parameters that found the solution below: