Phoebe:

Thanks (as always) for your response.

I spent two hours with Lacerte support yesterday. I believe that they understood that capital gains from equities investments are taxed in the taxpayer's home state and not in a foreign state, and therefore that California should not be taxing income from 1099s issued by Vanguard, etc., for a nonresident.  But that's what the software is doing.  Despite that, they insisted that there was nothing wrong with the software!  It was very frustrating!

The rep told me to enter an override in the state adjustments screen, which did in one entry what you are proposing for each entry.  Your solution is probably better because it is easier to trace.  But either is wrong because the income shouldn't be appearing on the California return at all!  Sigh.

Micah