"That TV is new."
Why is その incorrect here? Contextually you can't tell how far it is except for the fact it said "that" instead of "this".
This is a tricky one as it depends on the person knowing where the TV is in relation to themselves or the listener. このテレビは新しいです。 is "This TV is new" (close to speaker), そのテレビは新しいです。 is "That TV is new." (close to listener), あのテレビは新しいです。 is "That TV [over there] is new." (far from the listener and speaker).
Yes, so based on the original English "That TV is" there is no way to know that they want あの rather than その. If it had been the other way around, if Duolingo had said that あの was wrong and had wanted その instead, one could have argued that the absence of "over there" was meant to be significant, but in this case -- since the sentence doesn't say "That TV over there" -- there is no way to rule out その.
Report it as correct so that it gets fixed!