Okay here goes.  Simple example.  Qualifying Q expenses, which include the qualifying T expenses, are $20000.  Q form shows gross distribution of $20000.  $4000 of tuition which is included in the qualifying Q expenses used for T.  RESULT:  The recipient of the Q form has some taxable Q earnings but NO penalty.

As contrasted with:

Qualifying Q expenses, which include the qualifying T expenses, are $16000.  Q form shows gross distribution of $20000.  $4000 of tuition which is included in the qualifying Q expenses used for T.  RESULT:  The recipient of the Q form has some taxable Q  earnings AND a penalty.