@jlar
Q. **Can i enter a 1099Q line 2c "Adjusted Qualified Higher Education Expenses applied" amount on my daughters federal return to 'transfer' the amount of 1098-T qualified expenses entered (on my/parent return) and 'stranded' (i.e. in excess of the $4000 AOTC qualification)...plus other qualified costs, such as books, Room and Board, etc.
A. Yes. In fact, that is the way it should be done.
But once you calculate that none of the 1099-Q is taxable, either on your return or the student's, NOTHING is sent to the IRS. Whether you do all that work or just don't enter the 1099-Ql; you have the exact same risk of being audited by the IRS. Even if the calculation determines that some of it is taxable, only the taxable amount is entered on Schedule 1 (line 8); none of the calculations are sent to the IRS.
