So, in the end I think I found my own solution.
I read up on how the IRS defines self employment, earned income and scholarship/fellowships and
and based on such, am comfortable in what I intend to to. I am not sure Turbo Tax is asking the right questions to be honest (though it did in the online version, not software that I could see), because I was able to generate an 8615 worksheet which allows you to enter the child's other earned income, which this stipend clearly was, and then the problem disappears (no longer shows up as unearned income). This then does not impose the kiddie tax.
In the end, the child still owes less than the parent loses by claiming them (since they CAN b claimed, even if they aren't they don't get the AOC for example) so that's probably the route we will take.
Thanks.
