On Feb 6, 2017 I contributed $5500 to my TY-16 Roth.
On Feb 12, 2017 I discovered that only $1651 of my earnings were considered “compensation” for IRA purposes.
I immediately withdrew the excess amount, $3897.30 ($3849+48.30 earnings) from my Roth.
At that time, I also recharacterized $1671.72 ($1651+$20.72 earnings) from the TY-16 Roth to a TY-16 TIRA.

I submitted my 2016 1040 with nothing on line 15a and nothing on line 15b. I entered the TIRA deduction of $1651 on line 32 and attached the following statement:
____________________________________________
Form 1040, Adjusted Gross Income
Line 32 – IRA Deduction:
A Tax Year 2016 Roth IRA contribution of $5500 was made on February 6th 2017.
A recharacterization of $1651 of the Tax Year 2016 Roth contribution initially contributed on February 6th 2017 plus earnings of $20.72 was executed and reported as a Tax Year 2016 Traditional IRA contribution on February 14th 2017.
A Roth IRA distribution of $3897.30 was made on February 14th 2017 to remove a Tax Year 2016 excess contribution of $3849 made on February 6th 2017 plus earnings of $48.30.____________

In Jan, this year I received a 1099R with the following data:
Box 1 – 1671.72 Box 2a- 0.00 Box 7- R
Box 1 – 3897.30 Box 2a-48.30 Box 7- 8J

I am under 59 ½, removed the excess contribution in a timely fashion and I have qualified education expenses from a qualified institution well in excess of the $48.
I understand that Congress has not reinstated the tuition and fees deduction that expired in 2016. I am unsure if that prevents me from offsetting the 10% penalty with my AQEE. Based on my reading of 2017 pub 590b, exception 08 is still allowed. My reason for confusion is the caution statement in instructions for 8606 at the bottom of page two indicating that tuition and fees deductions have not been reinstated for 2017.
So, for the 2017 return:
1. Should I report the returned TY-16 contributions made and returned in February 2017 ($3897) on 1040, Line 15a?
2. Should I report earnings returned in 2017 ($48) as taxable on 1040, Line 15b?
3. Is exception 08 (distribution is less than qualified education expenses) is still allowed on form 5329 to offset the early distribution of income?
4. If exception 08 is not valid, do I disregard filing 5329 and instead report the 10% penalty on 1040, line 59?
5. Should I provide a statement to the 2017 return explaining the distribution in Feb 2017, including the fact that the distribution reduced my excess contributions to 0 prior to the due date of my 2016 return?

Thank you for providing your valuable guidance to help us navigate these complex regulations.

Sincerely,
Charles