Thanks JohnB5677 and Mark. I followed your instructions (Schedule E income then subtract out same amount in other reportable income section). However the tax owed increased a significant amount! My guess is that the the subtracted out income was treated as a "loss" and there was some income limit to amount of loss allowed to be applied. It does not make sense that the tax should be higher. I did add the royalty gain to schedule D as long-term gain prior to adding the schedule E information. I did this before submitting my question and getting your instructions. Would the order entered make a difference? If so, I can delete the schedule D info and then add it back. Any advice on how to effectively add this income as LT gain only? Since I did it this way initially (without schedule E), I know what the effective tax balance should be. I was surprised the tax owed increased.
