Since you still own the land, the general treatment is that the payment is not income but reduces the basis in the land that you own. So, if you paid $40,000 for the land and received an easement payment for $10,000, your new basis in the property is $30,000.
You still have to deal with the 1099 that was reported to the IRS. Report the income, then immediately report a minus entry for the same amount. Reference both entries as 'easement - basis adjustment'.
Follow the steps below to report this income that is not reported as self-employment income.
- Select Federal from the left side of the screen.
- Select Wages & Income on the left side of the screen.
- Scroll down to Less Common Income. Click the down arrow.
- Click Start / Revisit to the right of Miscellaneous income….
- Click Start / Revisit to the right of Other reportable income.
- At the screen Other Taxable Income enter the description of the income.
- Click Add another Miscellaneous income Item and enter the reversing entry (an equal amount as a negative number).
View the entries at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets.
The income will be listed on line 8z of the Schedule 1 Additional Income and Adjustments to Income and line 8 of the Federal 1040 tax return.
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