First question answer: Reduce the amount of long term care expenses actually paid by the $25K reimbursement, i.e. if spent $100K only report $75K as medical expense.
Second question answer: I would ignore the 1099-LTC as it pertains to inputting anything in Turbotax. Since the qualified contract box is checked the benefits are not taxable, so you do not have to fill out any other forms.
