It depends on how long the county has the easement. If it is short-term, you would add on Schedule E and you would have to offset it with any expenses to make it tax free. Since the county representative said it would be tax free, you can enter as a sale of property on Schedule D
(see Where do I enter the sale of a second home). You would enter the proceeds as the basis to cancel out the income.
You will have to adjust your basis when you sell your home in the future.
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