It works for me, so you must have entered it differently than I did. But we can't see your tax return and you haven't given enough detail about how you entered the 1099-MISC and the offsetting entry, and how you determined that the income is not completely offset. What specific form and line are you looking at to determine that? Are you looking at whether the income is completely offset before or after you enter the capital gain? What line of Schedule 1 is the negative other income on? Is it the full amount that you entered?
Did you enter the 1099-MISC as royalty income on Schedule E or as business income on Schedule C? If it's for intellectual property that you own but did not create yourself, it should go on Schedule E.
Where do you see that IP royalties can be reported as capital gains? That's news to me. IRC Section 1235 is for sale or exchange of patents. Royalties are not a sale or exchange. Can you post a link to a source for treating royalties as capital gains?
