I've been through this recently too - If the grant is a business grant then the income should be treated as business income. Look on the 1099 as one indication of whether it is a business grant - was the 1099 issued to a business, or to an individual doing business as xxx, etc? Another indication is what were the stated purposes of the grant, and what was the funding used for? If for business purposes, and the funding was used for business related expenditures, then these are further indications that the grant should be treated as business income. If the grant is specifically related to a farm business, then the income should be reported on the Schedule F. If the grant is for an ordinary (non-farm) business, then the income should be reported on the Schedule C.
But in answer to roshanip's question - yes, the additional business income would correspondingly increase the self employment tax. You might be tempted (as I was) to put it on the personal side (1040) and thus avoid additional SE tax, but if the grant was received for business purposes, I've been told it would be incorrect to do so. Also, of course, don't fail to write off any expenses you incurred in carrying out the terms of the grant. These can in some cases be written off in the same year in which the grant was received, and in other cases, might be depreciated over time. That might be your choice depending on the circumstances.
Good luck. FWIW, I think TurboTax could be better at handling these situations.
