You've got another issue to deal with. Because of the double dipping your student has to pay some tax. But having claimed the AOTC, on the parent's return, allows for an exception to the 10% penalty.
Ideally, TT asks how much was used for the credit. But I've found it doesn't always. You may have to use another workaround.
Normally, you enter the 1098-T, exactly as received, on the student's return. In his interview, you should eventually reach a screen called "Amount used to calculate education deduction or credit" Be sure the amount in that box is $4000. That will eliminate the penalty and generate form 5329 to claim the penalty exception.
Be advised some people are saying they're not getting the "Amount used to claim the tuition deduction or credit" screen on the dependent’s interview. The alternate workaround is to enter $4000 less than the actual box 1 amount, when you enter the 1098-T. That takes care of the tax calculation, but doesn't eliminate the penalty.
Try this, if needed: enter the actual the 1098-T amount in box 1 (+ the R&B if needed) but add $4000 to the box 5 amount. The AOTC and scholarship penalty exceptions are the same.
