A similar question was asked in June 2019 and the answer was to report the 1099-misc in Other Common Income with a description such as "Easement Payment" for the reason and the income would show as a line item on line 21 of schedule 1 of the 1040. It then said to make the adjustment for the reduction in value(basis) by making an entry under "Miscellaneous Income , 1099A 1099-C""Other Reportable Income" with "Reduction in basis for easement" as the reason and to enter the easement payment as a negative number. I said the 1099-misc and the adjustment would then show om Schedule 1 and line 21 and flow to the 1040.
In August 2024 a user reported that he had followed the above instruction in 2022 and the IRS did not accept it. HE said he was instructed to reflect it as a capital gains transaction on form 8949 and Schedule D. HE did so and made the cost basis equal to the proceeds resulting in a zero net gain. The IRS accepted this approach. What is not clear is if the payment had been reported on a 1099-misc or a 1099-S. My understanding is that that would make a difference on how the payment should be reported.
So, what is the correct way to report payment for a permanent easement reported to the IRS on a 1099-misc?
