how to enter 1099 misc

[dawnschen]

I received an 1099-misc from a law suit settlement due to the water damage of my rental property.  The community filed against builder and each of the water damaged property got an amount of money. 

How to enter the 1099-misc income in turbo tax? Should I enter in the beginning in wages/income session or should I enter in rental property as part of rental income? Thanks.

Best

Dawn

[DawnC]

What box is the income amount in?    You can only enter Box 1 amounts in the rental property section.    If it is in Box 3, it has to be entered in the Personal Income section.   

Loss-in-value of property IRS Fact sheet

 ‧ Property settlements for loss in value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement.

 ‧ If the property settlement exceeds your adjusted basis in the property, the excess is income. 

[dawnschen]

Thank you very much for you reply.  The income amount is in box 3, and the law suit was the whole community against the original builder due to the defected material for the water pipes. My property had water leakages /damages more than 5 years ago.

Now I understand because in box 3, I have to file as my personal income; however, the money is not my income, and more importantly it was related to the house repairs long time ago.  How to enter that kind of info?

Your help will be highly appreciated.

Best

Dawn

[MarilynG1]

Because you received a 1099-Misc, you will report the amount in Box 3 as Income; however, you will also make an 'adjusting entry' to offset the income.

The net effect will be no taxable income; just reporting.

Type '1099-Misc' in the Search area, then 'Jump to 1099-misc'.  Enter the 1099 info and Continue to a page 'Does one of these uncommon situations apply?' and choose 'lawsuit settlement'. 

Then under Wages & Income, scroll all the way down to Miscellaneous Income, 1099-A, 1099-C.  On the next page, scroll all the way down to Other Reportable Income.   Under Other Taxable Income, you can enter 'Rental Property Cost Basis Adjustment' (or something to that effect) with a negative amount to offset the 1099 income.

Be sure to keep this info as documentation for your Cost Basis adjustment to your rental property when you sell it.

Here's more info from IRS Pub. 4345.

@dawnschen