OK. Thanks for the screen shot. I see your dilemma.
Technically, you answer yes ($700 is more than $350 and $2700 is more than $1100). He is required to file a tax return.
When you answer yes, on that screen, the follow up screens will eventually tell you that you don't qualify to include the child's income on your return. He will have to file his own return.
He will be allowed a standard deduction of $2350 ($2000* + 350). He will pay tax on $350 of interest (2700-2350 = 350). So,about $35 of tax.
*Taxable scholarship is treated as earned income, but only for the purpose of calculating the standard deduction.
