If the entire amount of scholarships could have been used for living expenses, you can enter the entire amount of the scholarships as income on your daughters tax return. You can then claim the tuition and fees and other qualified expenses on your tax return for the American Opportunity Credit. What I can't tell you is exactly how to enter this on both of your tax returns using TurboTax.
@Hal_Al Hal_Al may know the details for how to enter it and explain it better than I did.
