1099 NEC received for a trust on oil & mineral payments

Royalty income is reported in box 2 of IRS form 1099-MISC.  Follow these steps.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click on Wages & income.
• Scroll down to Other common income.  Click Show more.
• Click Start / Revisit to the right of Form 1099-MISC.
• Enter the information from the form.

There are two options:

• Investment income from property you own – This includes natural resources extracted from your property by a third party who leases your property, as well as royalties from intellectual property that you didn't create yourself. This gets reported on Schedule E.
• Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C) – This includes income from natural resources that you extract from your property as well as royalty payments from intellectual property you created as an inventor, writer, artist, and so forth. This gets reported on Schedule C

Investment income includes amounts received from oil, gas or mineral properties when natural resources are extracted from your property.  These royalties are based on units, such as barrels, tons, etc. and are paid to you by a person or company that leases the property from you.  You may be eligible for a depletion allowance.

Royalties from intellectual property (patents, copyrights, trademarks, etc.) are only considered investment property income if you are not in the business of creating such works.  For example, you could purchase a copyright or inherit the right to receive royalties from a literary work.  In these cases, this income would be investment income.

Your income likely qualifies as investment income on Schedule E.

Make the selection of the type of royalty income at the screen Source of 1099-MISC Income.

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