Thanks for all the replies. Those were helpful in thinking this out.
Land Only: Correct. While we could never build on this land as it was an easement when we bought it, now that they’ve build a sidewalk, they’ve finalized or perfected (my terms) the easement and evidently had to pay us for the land as we can no longer, for example, park a car or put a temporary sign on that land. So I guess we sold some land.
However, when we bought this property (remember, 40 years ago) it appears from the assert worksheet that we put the lions share of the basis into the building making it as depreciable as possible. So, the basis of the land is negligible and thus we will have to recognize the majority, if not all, of the payment as ordinary income.
Thanks again for the insights. It really helps talking.to those who understand taxation and accounting. You guys speak my language. 😎
