Royalties for Patent held by 3rd party_Schedule C?

[arthurWL]

I received a 1099-MISC for royalties on a patent held by a 3rd party (University of which I am a professor). I entered it in Turbo Tax in the Personal Income, 1099-MISC section. I selected Royalty Income, but Turbo Tax options ended up associating this with a company (I entered the university's Licensing & Venture group name).  Turbo Tax then created a Schedule C. And it has me listed on the form as a Proprietor. Later, when going through final TurboTax automatic checks, it had me enter the principal business code for the university's Licensing & Venture group (which I had to hunt down), address, accounting method, material participation, etc.  This just feels wrong, as I am not not an employee/part of the university's Licensing & Venture group.  Is this wrong, and if so, how do I go about fixing/changing it?  Perhaps delete this schedule C and go back  to this section in Turbo tax somehow and try it again?

[arthurWL]

And now, with further Turbo Tax Check... It is asking: Schedule C (Patent with ... Univeristy Licensing and Ventures Group) : Filed Forms 1099 must be entered (Yes/No).  Which sounds like I am being asked if I filed form 1099?  I received a 1099-MISC from the university entity.   Really confused now

[ColeenD3]

Yes, this is wrong. Delete the 1099-MISC and enter it as a royalty on Schedule E.

A royalty property is a right to income from natural resources like oil, gas, or mineral properties.

This might also include royalty payments you'd get from copyrights and patents, but only if you are not in the business of creating such works. An example of this might be a patent you purchased in order to collect fees by licensing the patent.

[ColeenD3]

You did not give anyone a 1099 so answer no to that question.

[arthurWL]

Thanks. I deleted the schedule-C form, and also the source 1099-MISC entry.  I am now entering this royalty amount afresh under 1099-MISC, as royalty. It gives me a choice: (a) investment income from property you own or (b) royalty income from your business, including artistic royalty  or operating a natural resource business.  Neither of these options apply very well. I tried the (b) before, which led to the schedule-C mistake. Perhaps I should think of the royalty patent being my "property"  ?? so go the (a) route?

[arthurWL]

This royalty is for an invention I created along with a few other people at a University. Since we were university employees at the time (and I still am), the university owns the patent. But the university recognizes that I was one one of the intellectual creators of the IP,  by paying me (and others) royalty payments (since the IP is being licensed by a company, and they are making a profit with the IP).  

[JulieS]

Yes, in your case (a) is the better choice. Even though you don't legally own the patent, the tax treatment is the same as if you did own it. 

[arthurWL]

Nope, the 'investment income from property you own' is not correct... as it starts asking my farming questions. I am at a loss how to proceed. 

[arthurWL]

Should I be trying to enter this in the Business section (instead of personal)  instead?

[ColeenD3 · Accepted solution]

No, what I suggested in my previous post is that you enter it as a royalty that is found on Form 1099-MISC, not as a 1099-MISC with the description of royalty.

Go to Wags and Income and scroll to the entry shown in the screenshot.