Where do you enter 1099s covering payment for a well pad and electric lines on our oil lease property?

[gwlunn]

this was not a sale but payment for doing the work on our property that we have a oil well lease on.

[PatriciaV · Accepted solution]

Yes, since you received Form 1099-S, this transaction is considered the sale of a right-of-way and is reported as an Investment Sale (see screenshot below - click to enlarge). 

To find this section of TurboTax, use the Search/Find box, type in "investment sale", hit Enter, then click on "jump to investment sale." This will take you to the start of the investment sales section.

In order to record this properly, you have two choices:

1) You may allocate a portion of the adjusted basis in your property to the area of the right-of-way. This could be acreage or square footage. This option will reduce a) the amount of capital gains on the sale and b) the basis of your property when it is sold in the future.

2) You may report zero cost-basis for the right-of-way, which will make the entire proceeds from the sale subject to capital gains tax (generally 15% or 25%, depending on your tax bracket).

Under either option, the purchase date is the date you originally purchased the property.