The internship income should be reported on her return as 1099-MISC income. When running the 1099-MISC interview, there is a box to check for "this was a scholarship or fellowship."
There are a series of questions designed to test whether this ia earned income that she should answer no (no intent to earn a profit, not similar to other paid work, not planning to do the same work in the future, etc.)
It should not affect your AOTC, since it was not a scholarship.
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