How do I enter the expenses to cover a 1099-MISC from the State Of Nevada Petroleum Fund reimbursing us for cleaning up a oil spill due to tank failure?

[jnewell]

We received no money as all costs were sent to contractors the that did all the work by our environmental engineering company.  At https://www.law.cornell.edu/uscode/text/26/126 sect a 9 I read that:(a)General ruleGross income does not include the excludable portion of payments received under—... (9) Any program of a State, ...  which payments are made to individuals primarily for the purpose of conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. 

[view2 · Accepted solution]

The 1099 gross will have to be reported.

 Deduct the environmental cleanup costs on the “Other Expenses” line of Schedule C, E, or F (Form 1040). If the schedule requires you to separately identify each expense included in “Other Expenses” write >>>>“Section 198 Election”<<<<[a must description] on the line next to the environmental cleanup costs.