What do I do if the county sent a 1099-MISC (instead of 1099-S) for permanent easement?

[larson621]

A small portion of the appraisal was for temporary easement but the 1099-MISC was for the entire amount.  My understanding is that the permanent easement funds would not be treated as income but that temporary is reported as rental income.  But the 1099-MISC is for about 5 times the amount that was temporary easement (and no 1099-S).

[ThomasM125]

If a portion of the income reported to you is not taxable, you should enter the form 1099 in TurboTax the way it is listed and then enter a negative adjustment to Other Income to cancel out the non-taxable portion of the distribution.

 - Go to the Income and Expenses section of TurboTax

 - Choose  Less Common Income

 - Choose Miscellaneous Income, 1099-A, 1099-C

 - Choose Other reportable Income

 - Enter a description and the amount of your adjustment as a negative number

[larson621]

Thank you - this community forum is a lifesaver! I have a follow up question as well.  The full story is that the county offered around $40k for the easements (around $31k for permanent "land acquired" and $9k for temporary construction access).  But because we are still paying a mortgage, our lender decided that they would take a proportion of that $40k that matched the proportion we still owed on the mortgage.  So around $14k went to the lender, and the other $26k came to us.  The 1099-MISC was for the $26k.  So I think your answer explained how to handle the $26k in terms of income received and negative adjustment, but would I need to report anything for the $14k that went toward the principle on our mortgage?

[ThomasM125]

Since the $14,000 reduced your mortgage balance it is the same as it being paid to you and then you paying down the mortgage. So, if it would be taxable had you received it in cash, then it is income to you and should be reported a such. However, you mentioned that only the proceeds that apply to the temporary easement is taxable, so if you accounted for that amount when you reported the $26,000, then you don't need to make an additional entry on your tax return.