I received a 1099-PATR for land I purchased for personal use. However, I do lease some of the land to a local farmer. Do I need to claim the dividends as income?

[Teddey1]

I purchased 92 acres of land for personal use.  However, I lease 40 of it to a local farmer.  I claim the income from the lease on schedule e...  Do I need to claim the 1099-PATR and if so, where would I claim it?

[Fern · Accepted solution]

If the dividends reported in box 1 of your 1099-PATR is for on property purchased for personal use you do not have to report them.

The instructions for form 1099-PATR state “Any dividends paid on (1) property bought for personal use or (2) capital assets or depreciable property used in your business are not taxable. However, if (2) applies, reduce the basis of the assets by this amount.”

You would need to allocate the dividends received and make an adjustment to your cost basis for the portion of dividends that relate to the land that you lease. This will affect your gain or loss when you sell the property. However, none of these dividends get reported as income in your tax return.