WAIT, WAIT, WAIT!!!!!!!

Lets see if I have this.  Taxpayer gets a 1099Q for beneficiary son with $17000 distribution of which $5000 is earnings and $12000 of basis.  Ex claims son and the AOTC.

If, If, If the TOTAL qualifying expenses are ONLY $17000, then there is NO correct way to enter it in ProSeries so the taxpayer isn't taxed BECAUSE THE TAXPAYER WILL BE TAXED, at least on part of the $5000.  I believe this is exactly what ljr was getting at.

Just do as Lisa says and and fill out the worksheet for Qualifying Education Expenses for Other than Taxpayer, Spouse or Dependents.  Make sure you enter on Line 19 the amount the Ex used for the AOTC credit.  Then scroll down to Part III, Line 8 and tell your client to pay up.

You will need at least $21000 of qualifying expenses to make this go away, assuming EX claimed maximum AOTC.