The City expropriated a portion of my acres to build a sewage. How do I enter the proceeds? I was paid $6,000 for land, $3,000 for landscaping and $9,000 loss in value.

[gvance86]

I have 10 acres of vacant land as a separate piece of property next to my home.  The City expropriated a portion of the acres to build a sewage plant.  I was paid the following:

$6,000 for the value of the land taken

$3,000 to cover landscaping to help obscure the sewage plant from the view of our home

$9,000 to cover the loss in value to the remaining acreage.

What portion of these proceeds are subject to income tax and how do I enter on Turbo Tax?

[Coleen3]

You don't usually report payment for an easement. You would only reduce your cost basis in the remaining property, by the amount you received, for when the property is sold in the future.

[MichaelL1 · Accepted solution]

The $6K for the land taken is a sale and needs to be reported as follows:

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  Hard part will be determining what value of the cost of the acreage you need to assign to the sale as the cost basis.

The $3K for landscaping is a non-taxable reimbursement as long as you spent that much on the landscaping.

$9K loss in Value

Loss-in-value of property

•

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.

Source: https://www.irs.gov/pub/irs-pdf/p4345.pdf 

So if the acreage remaining has a cost of more than $9K (after the amount allocated to what was sold) then this is not taxable to you

[MichaelL1]

I talked with Coleen and added the above.  Do you need any more detail?

[gvance86]

Thanks, Michael. I entered the info exactly as you suggested. The lot was purchased in 1963 for $1,000 and has never been improved. Since the part the city took from us was approximately 40% of the lot I used $400 as the cost basis.  That gave us a taxable gain of $5,600 to include on our return. Thanks again. You were the most helpful of all the replies we received.  

[MichaelL1]

My pleasure, great you have it all completed already.