How do I report patent income as a capital gain when it has been reported on a 1099-Misc?

[smcharg]

That's all good and well, but why doesn't Turbo Tax permit you to indicate royalty income should be treated as a capital gain and avoid all of the nonsense.  That would provide direct linkage between the income and how it is to be treated and not the offsetting kluges offered up.

[LCatrett]

How SHOULD the EMPLOYER report this? Should it go on 1099-Misc as Other Income? 

[MarilynG1]

Yes, reporting patent income on a 1099-Misc as Other Income is appropriate.

Unfortunately, you still have to go through the exercise of reporting the income, backing it out with a negative entry, and reporting it in the Investments section in TurboTax to take advantage of a lower Capital Gain tax rate (if that applies to you). 

@LCatrett 

[Gerry D]

What does one do for the Net Investment Income Tax? If the inventor assigned the patent to the employer/university but still receives a portion of the royalty due to the Bayh-Dole Act, , does it escape NIIT under the trade or business exception?

[DianeW777]

No.  In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. 

• Net Investment Income Tax

@Gerry D