I did a practice return in TurboTax (TT). I indicated that I was a grad student and the only income I had was taxable scholarship. TT allowed me to make an IRA contribution.
Taking the practice return a step further, I indicated that I had $4000 of taxable scholarship but made a $6000 IRA contribution. TT denied me the extra $2000 contribution.
So, apparently, all you have to do is check the grad school box at the 1098-T screen and indicate you have taxable scholarship going on line 1 of form 1040 with the SCH notation.
