See the IRS qualifications below but, generally, the amount received for granting an easement is subtracted from the basis of the property. The transaction is reported as a sale of property and listed on Schedule D.
The land basis would be reduced. Sales costs would reduce the net proceeds. As an example,
Land Basis $50,000
Payment $11,000
Sales costs $1,000
Payment $11,000 less $1,000 = $10,000
Adjusted Basis $50,000 less $10,000 = $40,000
Report the transaction under sale of second home. Choose land as your option and report the basis of the land equal to the payment.
- In the upper right hand corner of the screen, click on the magnifying glass Search. Enter sale of second home.
- Click on Jump to sale of second home.
- At the screen Did you sell stocks, mutual funds… in 2020? Click Yes.
- Under type of investment click Other.
See this TurboTax Help.
See IRS Publication 544 Sales and Other Dispositions of Assets. Click down the left side under Easement.
Easement
The amount received for granting an easement is subtracted from the basis of the property. If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received.
Any amount received that is more than the basis to be reduced is a taxable gain. The transaction is reported as a sale of property.
If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement.
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