Your calculations are correct.
Q. Why is TT doing it wrong?
A. It's complicated and getting the entries just right is difficult. Short cuts might be needed.
Are you entering the 1099-Q on your return or the student's return (which one of you is the recipient)?
Does the student have any other income of his own?
Is the scholarship restricted? That is, must it be allocated to tuition? Making some of the scholarship taxable is frequently better than paying tax on the 529 distribution.
