Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!
I am happy to hear that your son has received such a gift! My daughter is a senior in high school right now and we are looking for scholarships for her!
The good news is that if the tuition is used for qualified higher education expenses, it DOES NOT HAVE TO BE at a school that is accredited by the US Department of Education. The taxability of scholarships is controlled by Internal Revenue Code §117.
To be tax free, Internal Revenue Code (hereinafter "IRC") §117(a) says that gross income does not include any amounts received as a qualified scholarship paid to an individual who is a candidate for a degree at an educational organization as described in IRC §170(b)(1)(A)(ii). A qualified scholarship is defined in IRC §117(b)(1) as any amounts received by an individual as a scholarship or fellowship grant to the extent that the individual uses the amount for qualified tuition and related expenses.
If we look at IRC §170(b)(1)(A)(ii) for the definition of an educational organization, we find that it is " an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on." Period. End of definition. It says NOTHING about having to be accredited by the US Dept of Education!
The University of Tokyo, one of the finest higher education institutions in the world, definitely maintains a regular faculty and curriculum and normally has a regularly enrolled body of students. Therefore, the amounts received by the student ARE TAX FREE to the extent that they are used to pay for tuition, books and related fees.
I hope this helps you! And congratulations on the scholarship!
If you have any more questions, please feel free to ask!
Have a great weekend!