You're overcomplicating things. Weather the income is earned or unearned doesn't come in to play here. It's "taxable" income, and that's basically all that matters. You are correct in that the excess scholarship money (and only that money) is taxed at the parent's rate. The program is designed so that the student claims it on their tax return, because with rare exception, excess scholarship is "always" returned to the student - not the parent. I'm just not all that familiar with the 8615 form. But from what I see on page 1 of the instructions at <a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-pdf/i8615.pdf">https://www.irs.gov/pub/irs-pdf/i8615.pdf</a> in the "Who must file" section, I interpret it as the 8615 is required. What I'm not clear on though, is what tax filer actually files it. From looking at the form itself, and the instructions, I would think the child would file it with their tax return since they are the one that actually received the unused scholarship money, and it is taxable income to the student - not the parent.
Now "can" the parent report it on their tax return? From what I see, the answer to the question is YES. But I don't see anything saying the parent is "required" to be the one to report it. While the parent can of course, it doesn't appear to me that the program is very well designed for such a scenario.
