Investors & landlords

Technically, yes, the payment should have been on Form 1099-S, but most governments/utilities use Form 1099-NEC instead. 

Payments for utility easement sales are not considered income. Instead, the payment lowers your basis in the property.  It does create a capital gain if the payment exceeds the basis in your land.  In most cases, you simply reduce your basis by the amount of the easement payment. Check your last property tax statement to be sure the easement didn't exceed the assessed value of your land (not your entire property).

You wouldn't have to report the payment on your tax return, except for the fact that you received Form 1099-NEC, and the IRS is expecting that amount to be reported. For more information on property easements, see: IRS Publication 544. 

To enter a Form 1099-NEC that is not for self-employment:

Open your return and go to Federal >> Wages & Income >> Other Common Income >> Income from Form 1099-NEC. Click Start/Update.

Or enter 1099-nec in the Search box located in the upper right of the program screen.  Click on Jump to 1099-nec.

1. On the screen Did you get a 1099-NEC?, click on Yes
2. On the screen Do You Want to Enter Your 1099-NECs Now?, click on Add a 1099-NEC
3. On the screen Let's get the info from your 1099-NEC, enter your information and click Continue
4. On the screen Describe the reason for this 1099-NEC, enter a reason and click Continue
5. On the screen Does one of these uncommon situations apply? Select This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby and click Continue.

To offset this income with the reduction in basis for your property, enter another 1099-NEC in the same manner, but enter a negative number for the amount in Box 1.

These entries will report both the income and the offset on Schedule 1 Line 8z Other Income. The total from Schedule 1 Line 10 flows to Form 1040 Line 8 as ordinary income.

Be sure to keep good records of the basis adjustment, which you'll need when you sell the property.