Thanks for all of the information. So to clarify the process:
1. Enter the full scholarship amount on my student's return under "any aid not already reported".
2. Do not enter any expenses on my student's return.
3. When it asks if student paid for room and board with a scholarship or grant, enter the full amount of the scholarship (as that is accurate in our case)?
4. On the parents' return, enter the tuition paid from the 1098T and the amount for books/supplies from personal receipts?
5. On the parents' return, DO NOT enter the scholarship info from 1098T box 5 (since the student has entered it on theirs)?
6. Hang on to the 1099Q for personal use with documents supporting payments for room and board (as in our case the scholarship + 1099Q distribution does not exceed cost of room and board).
This is what I did, and it did trigger the AOC for the parents and taxed the student for the scholarship. I just want to make sure I followed all of the steps correctly.
In this scenario, it is counted the student's income as 'unearned' (as seen on form 8615).
