Thanks for the reply, but unfortunately you didn't fully understand my question or the problem with Turbotax.
I had no problem selecting the box in Turbotax indicating that a portion of interest was from us Government bonds. I also had no problem identifying the types of Federal obligations that qualified for the Montana deduction and entered that amount on the subsequent screen to your screenshot.
The amount reported on the Federal 1040 as adjusted gross income and transferred to the MT state return (Form 2) reflects the full value of reported 1099 DIV income. The amounts identified as derived from US Government obligations was NOT larger than the total reported dividend, nor was a portion excluded from the AGI transferred to the state return. The error generated by Turbotax compares the MT 1099-INT income (zero, in this case) to the amount of 1099-DIV income that was derived from US Government obligations (which was greater than zero) and (wrongly) gives an error. There should be no error if the qualifying US government obligations dividends are less than the reported total DIVIDEND income reported 1099 DIV (which it was).
Separately, I called Turbotax and while it was a long (2 hr time) on the phone, I was advised that my interpretation was correct and that while Turbotax flagged the error, the return could still be advanced to the final step of filing. The agent at Turbotax told me that the programming error arises from the electronic coded feed that comes from the State of Montana, which appears to result in the error flag (incorrectly). The Montana Form 2 printed instructions are clear that the portion of US Government obligations (that qualify) can be subtracted (on the Subs form) from the amount reported as DIVIDENDS on the Federal returns and on the MT State Form 2 return.
The "work around" is simply to ignore the error message and proceed with electronic filing. Paper filing would accomplish the same thing, if explicitly following the written MT Form 2 instructions.
