No my memory isn't faulty. TurboTax does NOT take into consideration Schedule D income when determining whether you are eligible for the deduction. Instructions to Business Use of Home, Form 8829 does include Schedule "D" income. Go to the IRS Form 8829 instruction sheet for Line 8, second paragraph. It states it considers Schedule "C", Schedule "D" and Form 4797 income. So yes the program is faulty.
It sounds like you work for TurboTax or you're a Turbo Tax advocate. If you are then perhaps you can contact them so they can take another look at what type of income the IRS considers to be eligible for the Business Use of your Home deduction?
As for TurboTax rejecting your return to be E-Filed because of an override, it should be none of their business. You paid for the program and you paid to have your return E-Filed. If you prefer to E-File your taxes with an override then TurboTax should simply require you agree by checking off a box that the return will no longer be covered with the TurboTax accuracy guaranty.
