I'm thinking of having my son claim scholarship money as income on his taxes to free up $4000 to use for AOTC, as per this article in Forbes: https://www.forbes.com/sites/troyonink/2015/07/31/not-eligible-to-claim-the-2500-american-opportunity-college-tax-credit-try-this/#50efcc1e7a25, which states (in part) "...The solution is to elect on your child's tax return to claim up to $4,000 worth of the scholarship as taxable income. By doing so, you will free up the $4,000 in qualified expenses you need to claim the $2,500 American Opportunity Tax Credit each year."
However, I can't find any instructions in the IRS publications to clarify my case, which is:
(1) my son is receiving a full scholarship (covers all qualified expenses), and
(2) the scholarship payments are all "internal transfers" at the school, i.e., he normally does not get a check. It shows as charged and paid on his student account without money ever coming to him (so there are no receipts to show, only a printout of a school statement). It seems like a stretch to count this sort of thing as income.
I have three other kids to get through college (and I doubt they will be lucky enough to get a full-ride scholarship), so I don't want to risk my eligibility to continue to claim AOTC (the form 8863 instructions are very clear about the ban for misconduct).
p.s. paragraph 2 of section 3 of 8863 instructions do seem to accommodate this sort of thing under conditions where they waive the 1098-T requirement, "...has certain qualified education expenses paid entirely with scholarships"