There are many possible disadvantages of including your child's income on your tax return. It can cause you to pay more tax overall than if you file a separate return for the child. The only advantage of reporting the income on the parent's return is that it's less paperwork. IRS Publication 929 has a long list of reasons that reporting the income on the parent's return could result in paying more tax. See "Effect of Making the Election" on pages 11 - 12.
What kind of capital gains does she have? Does she have gains from investment sales reported on Form 1099-B, or does she only have capital gain distributions on Form 1099-DIV box 2a. If she has sales on a 1099-B you cannot include her income on your tax return.
If her only income is dividends and capital gain distributions, you should be able to use TurboTax Free Edition for her return. Otherwise you could use IRS Free File.
