County paid me 15k on a 1099MISC for buying my yard for road widening. my property value went down 15k. How do i avoid paying 5k in taxes here. that wouldn't be fair.

[Lisa995]

In what box is the 1099-MISC amount shown?

[avamerriment]

Box 7

[TomYoung]

If this was really for the purchase of some real estate then you shouldn't have received a 1099-MISC with an amount in Box 7.  Box 7 is for "Nonemployee compensation", "compensation" being for your work, your effort, which would mean "earned income".

[avamerriment]

I agree after reading what box 7 is for that this doesn’t make sense.  I contacted the county but they didn’t send out the actual forms. They’re contacting their vendor. I’m going to ask them to move it to box 3??

[Opus 17]

There are basically two ways to deal with this in TurboTax,  assuming the county doesn't or isn't willing to change the form.   The money is not income, as long as you paid more than $15,000 for the property. Instead, it reduces your basis, and may result in higher capital gains tax if you sell it later. You should keep records of this transaction with your other important tax papers for as long as you own the property plus 7 years after.  1.  The instructions for the 1099 form say that if you receive a form in error, you should not enter it on your tax return. Instead, attach a copy to your tax return along with a written statement explaining why this is not taxable income to you and file your tax return by mail instead of e-filing.  2.  Enter the 1099 as other income not subject to self-employment tax. You would do this if the income is in box 3, or if inbox seven, by answering all the qualifying questions that no this is not income earned from working, no you do not intend to make a profit, no you do not intend to do work like this in the future.  Then, enter a counterbalancing item of other income with a value of minus $15,000, give a reason like "basis adjustment".   This will net out the income and resultant no tax. By reporting the 1099, you avoid some of the IRS computer matching systems. However, you may get a letter asking you to explain the negative adjustment. 

[Opus 17]

So on reflection I'm not thrilled with my answer above. That answer would apply if you were receiving a payment for an easement, it does not apply if you subdivided your property and sold part of the property.

[Opus 17]

I think what you need to do is file with the sale of an investment as suggested above, and print your return and mail it instead of e-filing.

In TurboTax, go to the section for the sale of stocks and other investments. Choose "other investments", not the sale of your home.   List the purchase price as $15,000 and the selling price as $15,000.   Also attach a copy of the 1099 to your tax return along with a written statement explaining the circumstances. Print your return, sign it, and file by mail. Don't forget to also mail in your state return. 

 This transaction also reduces your basis on the remainder of your property. Whenever you sell the home and you list the sale on your tax return, reduce your original purchase price by the amount of the sale of this part of your lot, $15,000. 

Both box 3 or box 7 on a 1099MISC is incorrect. It should either not be reported as income at all, or be reported on a 1099-S.

[avamerriment]

I noticed when i moved the 15k to box 3 for the 1099misc in turbo tax then i didn’t owe taxes on it. But you’re saying i need to ask them to send it out on a 1099S? Any certain box on the 1099S? I already had called them to see if they could move it to box 3 on form 1099 misc. i can always tell them something else when i hear from them again

[Opus 17]

You should owe income tax even if you report it as "other income" as if it was in box 3.  Just less tax than if in box 7.  (In other words, while your refund may go up or your tax owed goes down, you are still paying tax on the income.)

Real estate transactions are reported on form 1099-S, not 1099-MISC.  Here are the instructions for reference.  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1099s.pdf">https://www.irs.gov/pub/irs-pdf/i1099s.pdf</a>

If the county issues a 1099-S and cancels the 1099-MISC, you can enter the 1099-S in the program.  But make sure you still click the section for sale of other property, or sale of investment property, and NOT sale of your personal home.

If the county does not issue a 1099-S, don't try to guess about boxes and enter a fake 1099-S.  Just report the transaction as "sale of other investments" or "sale of other property".  Not every investment sale results in the issuing of a 1099 form and you can enter the transaction without a form.

[MichaelL1]

OK I can help.

As long as the cost (or basis) of the land was more than the $15K you recieved there will be no gain or loss on the return. 

You will report this under Investments and you will show $15K as the cost (if the property cost at least that amount) and then the new basis of the land will be reduced by the payment and you will pay no tax.

To enter your Investments sold

Click on Federal Taxes

Click on Wages and Income

Click on I'll choose what I work on

Scroll down to Investments

On Stocks, Bonds, Other, click the start or update button

Please follow this answer I gave someone else on this same issue.

https://ttlc.intuit.com/replies/5793610

[Lisa995]

Having this amount shown in Box 7 of the 1099MISC is going to make IRS expect to see a Schedule C with the return since Box 7 is for self employment income....kind of messy to deal with.

[avamerriment]

I saw your answer to the other persons question yesterday but I received a 1099 misc. Not a 1099-S. When i enter the 1099misc (money is in box 7) then i owe 5k in taxes.

[Lisa995]

right, they screwed up by putting it in Box 7, at best it should have been in Box 3.  Ideally a 1099S would have been used.

[avamerriment]

Can i do anything to get out of this 5k tax bill. I don’t have enough itemizations to get anywhere on the deductions side.