Taxable scholarships are a "hybrid" income category. They are unearned income for most purposes, including the "kiddie tax". But taxable scholarships are treated as earned income for purposes of a student-dependent's standard deduction. So since her income is less than $12,550, it is wiped out by her standard deduction and there is no tax. TurboTax is doing it correctly.
Her standard deduction is $1568 + 350 = $1918 and will show on line 12a of form 1040. The standard deduction for a dependent is the greater of $1100 or their earned income + $350 (but not more than $12,550). For the purpose of that calculation, taxable scholarship is treated as earned income.
