Yes, business gain/loss is not portfolio income. Investments form a portfolio that may generate gains and losses. But in your situation, the long-term capital gain(loss) was business-related, not portfolio.
From the IRS Instructions for Schedule K-1: "Portfolio income includes income (not derived in the ordinary course of a trade or business) from interest, ordinary dividends, annuities or royalties, and gain or loss on the sale of property that produces such income or is held for investment."
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