Thank you for your response(s) to my question(s). After reading the PUB link, I still believe TT is doing the wrong thing. I follow the flow chart on pub 970 Figure 3-1 and I can claim the Lifetime Learning Credit. I think the only box that has a chance of derailing my eligibility is the vary vague "Did you use the same expenses to claim a deduction or credit?". I'm confident the answer is 'No' to that and the fact that TT also says I'm eligible seems to confirm.
The next part to decide is if the LLC is based on the same expenses used to figure out the QTP. Diving into that section, page 45,the AQEE is reduced by any tax-free educational assistance. None of the bullet items apply in the "Adjusted qualified education expenses AQEE". So my AQEE is the entire earnings portion of the 1099Q or $9,268.
My earnings, $9,268 and basis, $3,431 = $12,699 which matches my 1098-T. The total distributions are NOT more than the beneficiaries AQEE, so no portion is taxable.
The sections Figuring the Taxable Portion of a Distribution on page 45 & 52 pf pub 970 don't apply because there was no excess distribution. There is no American Opportunity credit so that section doesn't apply. The "Coordination with Qualified Tuition Program Distributions" section talks about distributions from BOTH a Coverdell ESA and a QTP. That doesn't apply. On page 52 there is a section called "Coordination With American Opportunity and Lifetime Learning Credits". This does not apply to my situation.
Based on this, TT filling out any ratios is incorrect. Line 23 of the 1099-Q Summary should be $0.
I do understand the math you provided but that would only apply if some portion of the distribution was taxable.
I talked with a friend who uses TaxAct and has a very similar situation. TaxAct did it the way I expected not the way TT is doing it.
