@DJP62
"SHE has a 1098-T that shows the amount paid & the amount received as a "scholarship or grant" - the latter being the amount for the 1099-MISC given to my husband"
Are you saying the amount on the 1099-misc is duplicated in box 5 of the 1098-T? If so, when she enters the 1098-T, in Turbotax, she should subtract the 1099-misc amount. It should not be reported as income on your tax return and scholarship on your daughter's return. Since you and your husband have paid tax on it, it is not tax free scholarship and should not be reported as such on your daughter's return.
The 1098-T is only any informational document. The numbers on it are not required to be entered onto your tax return.
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. Clearly, the school is unaware that you husband got a 1099-Misc
