In TurboTax, reporting a 1099-S for a cell tower buyout is different from your previous 1099-MISC rental reporting. Because you are being paid over 5 years but received a 1099-S for the full amount, you generally have two choices in how to enter it.
Option 1: The Installment Sale (Recommended)
This method allows you to pay taxes only on the money you actually received this year, rather than the full amount on the 1099-S. if you choose this method, you will need to report this in the same manner for five years, starting with this year.
- Open your return and go to the Federal tab.
- Go to Wages & Income.
- Scroll down to the Less Common Income section (you may need to click "Show more").
- Select Start or Revisit next to Installment Sales.
- Answer Yes to "Do you want to report an installment sale?"
- TurboTax will guide you through entering the information:
- Description: "Cell Tower Lease Buyout / Easement."
- Sales Price: The full amount shown on your 1099-S.
- Cost Basis: This is the portion of your land's original cost attributed to the tower area (e.g., if the tower takes up 1% of your acreage, use 1% of what you paid for the land).
- Payments Received: Enter only the amount you were actually paid during the tax year.
Option 2: The "Investment" Sale (Lump Sum)
If you prefer to pay all the taxes now (perhaps if you expect to be in a much higher tax bracket in the future), you can report it as a standard land sale.
- Go to Wages & Income.
- Find Investments and Savings and select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other.
- Select Add Investments.
- When asked what type of investment, select Other (or "Land").
- Enter the details from the 1099-S.
Important: TurboTax will ask for your "Cost Basis." If you enter "0", you will be taxed on the entire amount. If you enter a basis (as explained in Option 1), you only pay tax on the profit.
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