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Easement legal fees

Property/Business: Farm land

Use: CRP (Schedule F) 1099G

Issue: Easement on Property Purchased by Power Company  

2023: Paid Legal Fees for negotiating Easement Purchase Agreement, Agreement included purchase fee and reimbursement for legal fees.

2024: Received Purchase Payment (1099)

2024: Received Legal Fee Reimbursement (1099)


How should the Legal Fees that were paid to the attorney in 2023 be claimed?  Expense? or ?????

In 2024, how is the Received Purchase Payment  (1099) to be reported?

In 2024, how is the Received Reimbursement (1099) to be reported?



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Easement legal fees

The payment for an easement is not income, it is a reduction in basis of your property. 


The payment for the attorney fees can be reversed with an equal expense. 


If this is a personal residence, enter as "Other Income" then enter reversing (negative) entries to offset the income. 

Be sure to include the payment for easement after a sale to compute any capital gain. The payment lowers your basis by the amount of the payment. 


If this is a business, enter the 1099 for the fee as income and enter an offsetting expense for the attorney fees.

Next, enter a sale of property in the amount of the easement. Report that you sold XXX portion of land for XXX dollars so there is no gain, no loss and the basis is reduced.  


Since this crossed years, you'd have to claim the expense for the attorney fees in 2023 and the reimbursement in 2024. 


Be sure to enter the expense separately as "Easement fee expense" in 2023 

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