@DavidD66 said "If the student is not your dependent, then the student should report the gain. It doesn't matter if the distribution (1099-Q) sent to/in the name of the parent(s)".
I disagree with that. The 1099-Q is reported on the "recipient's" return. The recipient is the name and SS# on the 1099-Q.
Q. Is there a way to offset that distribution on the parent's return by the amount of the scholarship?
A. Yes, the TT interview theoretically handles this situation, but it's messy and easy to make mistakes. Here's a workaround:
Enter the 1099-Q. When asked who the student is, answer: someone else not listed here, whether he is you dependent or not (lying to TurboTax to get it to do what you want does not constitute lying to the IRS). Enter the student's name when asked. A few screens later, you'll get one simple screen to enter expenses. Also enter the amount of the scholarship in the box "Tax-free assistance". This reports the earnings as taxable and claims the scholarship exception. You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later. TT will prepare form 5329 to claim the penalty exception.
