Thanks, Rick.
I think the NJ government instructions are clear, even though they may not make total sense. It may be because NJ allows a pension exclusion when income is under a certain level. That exclusion isn't applicable in the situation at hand.
Regarding your 2nd bullet point, I just want to clarify. The NJ input has an area to enter information from the NJ K-1 (even though the information from the federal K-1 has been entered in the federal input - as guaranteed payment). I entered the amount as pension, as per the NJ K-1, but it did not flow to the NJ return. That is why I went directly to the NJ-BUS-1 and entered the amount as partnership income. (Alternatively, I could input the amount as guaranteed payment on the NJ K-1 input screen.)
I thought there should be a way to make this work properly. So, I'm still open to suggestions.
However, if no solution is found, I'm inclined to go with your suggestion - leave the NJ return as I have it and pick up the amount as partnership income. I don't want to see a matching notice, but I can deal with it.
