@briandsmith said "I think the only way to resolve this is to remove her as a dependent on her father's return".
No. The "kiddie tax" is NOT based on her being a dependent. It's because she is a full time student, under age 24, whose earned income is less than half her support*. The father giving up the the tax benefits, of a student-dependent, will not reduce the student's tax. Furthermore, she is still required to report that she CAN be claimed as a dependent, even if not actually being claimed.
What are her numbers? Box 1 and box 5 of the 1098-T? Books and computer? Any other income? Is the parent's income too high to claim the Tuition Credit?
*Reference: https://www.irs.gov/taxtopics/tc553
