The 1098-T can be entered on both returns, sometimes with adjustments. When you enter the 1098-T, on your return, box 1 should equal box 5. Yes, under-report the tuition from the 1098-T, because he's using it on his return. You just need to show that scholarship paid for tuition, so you can claim the penalty exception. Be sure to enter room & board, but do not enter books.
He enters the 1098-T, as received. He enters book and materials costs, but not R&B.
This is easier to explain with actual numbers. Essentially, you need to have an idea of the outcome, so that you know what to input.
