Informing team member about lack of promotion over politics

I have an open position in my group for a system admin since the last one abruptly left in December. We have had an employee step up to fill the role temporarily (with my assistance) and she’s done an admirable job even to the point of being awarded as our employee of the month. She applied for the open position and I was frankly blown away by the extra effort she put it with external certificates and tailoring the resume to the job. However we had two other internals apply; one is someone who is almost overqualified and another is the big big bosses son who has IT background but doesn’t differentiate himself enough from the current step-up employee. I’ve been told by my corporate team that I cannot hire her because it’s too many steps up the ladder and won’t be allowed. My direct boss wants me to hire the kid and disregard the overqualified employee but the arguments are shaky at best.

I want to do the right thing but realize I cannot go against my bosses wishes. I have to tell the step up employee she’s not getting the position but I know this is going to be dropping a poisonous bomb into my group and I expect there to be massive fallout including potential resignations in the near future. I feel like I’m trading my departments stability/harmony for a future political favor for my boss and one that I 100% get to deal with the fallout on. How do I do this effectively?

Second Edit: The boss and I got out of a meeting with HR where I am going to promote her to another level where she will get a significant raise and fulfill a system analyst position. I will keep the management portions myself and allow her to finish school/program training to set her up to take full SysAdmin position once she completes it. It’s effectively the stepping stone position she needed to satisfy the corporate rules on level jumps.

Thanks for everyone’s advice and help!!