Whoops, I wasn't thinking straight. The taxable portion of the scholarship, while reported on the federal W-2 line is unearned income, but not investment income. Therefore it is subject to kiddie tax IRS Form 8615 and CA FTB3800.
As a dependent, her standard deduction in CA is $1,100 so her taxable income is $3,400. The first $2,200 of that is taxed at her 1% rate and the remaining $1,200 is taxed at your rate which is likely under 10% and absolutely no more than 12.3%. So the tax should be on the order of $220+$120 = $340. $1500 certainly makes no sense.
