Facts: 21-year old student has two 1098-Ts from 2015. First one is from undergraduate, as he finished undergraduate in May 2015. The undergraduate 1098-T shows $4,000 in tuition (box 2) and $11,000 in scholarships (box 5). I understand that this would - in isolation - result in $7,000 of income to the 21-year old. However, the student entered graduate school in the fall of 2015 and has a 1098-T from the grad school with $29,000 in tuition as well as $2,000 in scholarships.
Worksheet 1-1 on page 7 of Pub 970 would seem to suggest that the tuition and scholarships can be combined when considering whether the tuition is in excess of the scholarship funds. If so, then there is no taxable scholarship for 2015.
TurboTax seems to want to show the $7,000 as income and it isn't clear to me whether it is truly income (meaning I don't understand the rules correctly), or whether there is a bug in TurboTax...or whether I have a data entry issue.
Thoughts?
Thanks.