Federal Tax:
In Turbotax Federal, click Wages & Income -->Less Common Income-->Miscellaneous Income, 1099-A, 1099-C--> Other Reportable income
Add Description: See Form 8833, China Tax Treaty
Amount: -5000.00
(Make sure it's negative)
By doing that, you can't E-file since Turbotax can't generate form 8833. You have to download and print the forms from Turbotax and fill out form 8833, and then mail to IRS
See details on Form 8833 here: http://posts.careerengine.us/p/56d91d52f0c12b6378a9199a
https://www.irs.gov/pub/irs-pdf/f8833.pdf
For State Tax, please check if your state follows the federal treaty exemption rules. In some states like Connecticut, you have to add the 5,000 back.