thomasbomb,
Yes, you did answer correctly. Be sure to include books and other qualified educational expenses (as described in IRS Publication 970) in order to minimize the scholarship income.
So, back to your original issue. You are correct that the Michigan scholarship income is not taxable by CA since it was incurred while you were resident of the other state. Please confirm that your parents are CA residents. In the meantime, I will experiment with TurboTax to see how to override entries on IRS form 8615 that were carried onto CA Form 3800.
