@BB_0
Now we know what's going on, and @Bsch4477 has the solution. His suggestion does work. You're just missing how to get there. There's still one mystery, but it's just academic at this point.
Royalty income on Schedule E is investment income, so it gets added to the total investment income on Form 8960 and increases the Net Investment Income Tax (NIIT) on Form 8960. But other income on Schedule 1 line 8z is not investment income, so the negative other income on that line reduces total income and taxable income on Form 1040, but it does not reduce investment income on Form 8960. So even though the negative other income cancels out the additional regular income tax, you still have the additional NIIT. The solution is to remove the other income entry and enter $100,000 as an expense on Schedule E. That will offset the investment income as well as the total income.
Here's how to enter the expense on Schedule E line 19 with a description. After answering "None of the above" to the question about 750 hours or 50% of your time, you get the Rental and Royalty Summary screen. On that screen, click the Edit button and continue through the screens. You will come to a screen that says "Review Your {xxx} Royalty Summary." On that screen click the Start button for Expenses. Continue through the expense screens (you don't have to enter anything) until you get to "Any Miscellaneous Expenses?" On that screen you can enter a description and the $100,000 as a positive amount. That will put it as an expense on Schedule E line 19 with the description that you entered, and will take it off of Form 8960.
What's a mystery to me is why the same thing didn't happen when you entered a 1099-DIV instead of a 1099-MISC. Dividends are also investment income. When I enter a 1099-DIV it also goes to Form 8960, just like the royalties. What box of the 1099-DIV did you enter the dividends in? Did you enter it in the same tax return, or did you try that in a return that did not have enough other investment income to hit the NIIT? But as I said, this is just of academic interest at this point. It doesn't affect the solution to your problem.
