Once we calculate the expected outcome, there's are simple workarounds for entering it in TurboTax to get it to show that outcome*.
How much of the scholarship can be used it on qualified or nonqualified expenses? Do you know for sure that the rest is restricted (must be used for tuition)? How much other expenses does she have for books and a computer?
* Manually calculate the taxable amount of scholarship and enter the 1098-T, on her return, with 0 in box 1 and the taxable amount in box 5. On your return, enter $4000 in box 1 and 0 in box 5. Enter no other numbers.
