I got this resolved via the TurboTax help call line. Seems it's a small bug in TurboTax-- related to TurboTax's Federal portion on form 8949 for schedule D didn't accurately carry over the Long Term non covered and covered cost basis data to the Arizona 140 Capital gains worksheet which has columns a, b, and c. These 3 columns on the Arizona worksheet workout the non covered and covered securities acquired before and after 2011. Result: the warning message reported in my question above.
Resolution: Go into the Arizona forms section of TurboTax and find the capital gains worksheet. Manually key in the longterm noncovered cost basis number and it will then calculate the other two columns to the left (a and b). That should correct it. The Smart Check validation should now pass. TurboTax you may want to check this bug and fix it. Thanks for the support on the phone.
