If the dividends reported in box 1 of your 1099-PATR is for on property purchased for personal use you do not have to report them.
The instructions for form 1099-PATR state “Any dividends paid on (1) property bought for personal use or (2) capital assets or depreciable property used in your business are not taxable. However, if (2) applies, reduce the basis of the assets by this amount.”
You would need to allocate the dividends received and make an adjustment to your cost basis for the portion of dividends that relate to the land that you lease. This will affect your gain or loss when you sell the property. However, none of these dividends get reported as income in your tax return.
