RE: $45,000 less $26,000 (scholarship, used to pay for tuition fee) = $19,000 (excess distribution), so we're paying taxes and penalty earnings part of the $19000 ($19000/$45000) which is $300. I think he ends up paying just the penalty of $30, that's why his refund is showing up as $34 ($64 taxes deducted less $30 penalty).
The entire earnings ($709) on the $45K distribution is taxable, but only $299 (the earnings on distribution not used to pay for educational expenses) has a 10% penalty.
