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I could not agree with you more.. The 1 year old is at an age where if she is demonstrating such dominant behaviors already- she is not a safe fit for your 4 year old at this point.. She could become more tolerant but NEEDS serious work.. Discussing the situation with a veterinary Behaviorist would be your best option if you were trying to keep the dog, but it is going to take some time and patience.. When the dogs are around each other it is going to need to be in a structured controlled setting and the behaviorist will have structured guidelines.
If you are wanting to return her due to safety concerns for the 4 year old. I think that would be a fine decision as well.