oil and gas royalties are investment income. not sure what you mean by oil and gas royalties being business income. O&G royalties are reported on schedule E page 1. the property type is 6 (royalties) and the location is royalties. maybe to clarify, if you have a business that has an investment in a partnership producing royalty income then proper entry would transfer the entries from the k-1 to schedule E page 1., if the business owns an interest in a royalty trust, the royalty trust income does not get reported on schedule C by schedule E. on the other hand if what you have is a working interest in O&G owned directly that gets reported on schedule C.