Royalty income is reported on a Schedule E, not as miscellaneous income. A person could make $4000 in hobby income. My wife paints porcelain works of art as a hobby, and actually sells some occassionally. She'd do it whether or not she made a profit. Now, if you make money 3 of 5 years then there is the presumption that your reason is profit motive regardless. But a single year of income in any amount could well be hobby income.

