TurboTax asks the question whether you have received a form 1099-Q so that the program can take you to the form entry page if you answer yes.
On your second question, if your daughter is otherwise eligible for the AOTC and you are not phased out of the AOTC by your income, you can reserve $4,000 of tuition to claim the AOTC on your tax return.
Your daughter will also enter the form 1098-T on her return. TurboTax will report as taxable income the excess of scholarship over tuition. The taxable amount will be reduced by any amount of books and supplies entered. It will be increased by the amount you have used to claim the AOTC. She will find a page asking for the amount used to claim the education credit. She would then enter $4,000.
The tax that she will pay on the $4,000 extra scholarship will be much less than the AOTC of $2,500 that you'll receive.
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