Wind Development Rights

[906bw]

In 2024, I received income on a small tract of land for "Wind Development Rights." This is a small annual per-acre payment that the energy company pays the landowners while they negotiate the rest of the deal prior to construction. Sounds like a rental to me, but I received a 1099-S with boxes 1 and 2 checked.  If I go down the 1099-S Real Estate Transaction rabbit hole, we get into land cost, basis, etc. Not relevant. I guess it should be a 1099-MSC, but I am stuck with the S. I can force a zero cost on form 8949 and get the correct amount to flow to Schedule D, but I don't want to set off any fire alarms. Is there a better way? I already had it entered as a 1099-MSC and thought I was done until...1099-S ???

[Vanessa A]

It doesn't sound as though you have sold the land yet?

If not, you can enter it as Other income and then in the description you can enter 1099-S from Wind Development Rights or what the name of the company is.

To enter it this way, select the following:

1. Federal
2. Income and Expenses
3. Scroll down to Less Common Income and click Show More
4. Start next to Miscellaneous Income
5. Start next to Other Reportable Income

[906bw]

I'm still a bit confused. I should have mentioned that I am using H&B Desktop. It works better when I use the right words. The 1099-S is based on a payment for an option agreement for a possible future wind lease. No land sales are involved. Do I still follow your guidelines if the transaction is for an option?

[PatriciaV]

Yes. you are correct that this payment should have been reported on Form 1099-MISC (Other Income) as this is a lease bonus related to the use of your land. However, you are stuck with Form 1099-S, which can be reported as VanessaA outlined earlier. As long as you report as least as much income as is shown on Form 1099-S, you have met the IRS requirements.