Please use this link from the Small Business association to report your patent royalty income. it would be reported as Schedule E income. when you begin the section, it will ask you if this is rental income or royalty income. You will check royalty income. Then a pop up will occur asking you the type of royalty it is, Indicate patent royalty. You do not need to enter an address and you can move on to the next screen to make your entries,
If you need to report as a capital gain, you will need to do the step I listed above and then:
- Go to "Other reportable income" in the income and expense section and put in a negative number to subtract that income out and put in the description somehow saying reported in capital gains sec 1235.
- Once you have accounted for the 1099-Misc and then subtracted it, then go to "Stocks, Bonds..." area and enter a long-term sale of "other" and describe as "1235 Patent sale" to get the income on schedule D.
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