What's going on is the "kiddie tax". Full time students, under 24, have to pay tax on unearned income (over $2200) at the parents marginal tax rate. Note that form 8615 is part of her tax return. The kiddie tax calcs are on that form.
Unearned income includes unemployment compensation, scholarships as well as interest, dividends and capital gains. Any taxable portion of a 529 plan distribution is also unearned income.
